Flintview Business Capital in San Luis Obispo, California offers this worksheet so owners can read their own balance sheet before asking about a credit line. Funding partners use their own measures and make their own decisions.
Liquidity Ratio Calculator for San Luis Obispo, CA Physician Practices Planning Provider Hiring
Current assets are cash, receivables expected within a year, inventory and prepaid expenses. Current liabilities are bills and debts due within a year: accounts payable, accrued payroll, the current portion of loans, and any balance on a credit line.
Long-term items stay out of both sides: equipment, the building, the security deposit on a lease and the part of a loan due after the next twelve months. Getting that split right is most of the work; a bookkeeper or accountant can confirm which line belongs where.
Illustration only, invented figures: a physician practice planning to hire a provider has $186,000 of current assets (cash plus insurance receivables) and $124,000 of current liabilities. Its current ratio is 1.50 ($186,000 / $124,000, our arithmetic). The provider's salary will add to accrued payroll before the provider's collections add to receivables, so the ratio is likely to dip for a few months.
A related measure, the acid-test ratio, leaves inventory out of current assets. A practice holds little inventory, so its two ratios sit close together; a store's can be far apart.
Liquidity Ratio Calculator: Numbers a Dental Office Can Pull From Its Books
A dental office can pull every input from its balance sheet or its accountant's year-end statements. Inventory for a dental office is mostly supplies; receivables are patient and insurance balances.
Illustration only, invented figures: current assets of $94,000, including $18,000 of supplies, against current liabilities of $71,000 give a current ratio of 1.32. Leaving the supplies out, the acid-test ratio is 1.07 (($94,000 - $18,000) / $71,000, our arithmetic).
- Cash in operating and savings accounts.
- Patient and insurance receivables expected within a year.
- Supplies and any inventory held for sale.
- Accounts payable, lab bills and accrued payroll.
- Payments due within a year on loans and leases.
Current Ratio Calculator: Inputs Restaurant Owners Already Have
Restaurant owners have most of the inputs already: the bank balance, food and beverage inventory from the last count, and the bills on hand. Restaurants usually carry few receivables, because customers pay at the table, so cash and inventory make up most current assets.
Illustration only, invented figures: $52,000 of current assets against $61,000 of current liabilities gives a current ratio of 0.85 (our arithmetic). Below 1.0 means bills due within a year exceed what is on hand or coming in. That is not unusual for a business paid in cash daily, but it is a number a partner will ask about.
Two things move a restaurant's ratio more than most: the timing of supplier payments and the size of the last inventory count. A ratio worked out the day after a large food order is paid looks different from one worked out the day before, so use month-end figures and work the ratio for the same day each month.
- Take current assets and current liabilities from the same month-end balance sheet.
- Divide assets by liabilities and round to two decimals.
- Repeat for the prior two or three month-ends.
- Note anything unusual in a month: a large order, a repair, a loan payment.
- Bring the series, not one month, to a conversation about a credit line.
Reading the Current Ratio Calculator Result Before a Patio Build-Out
A result above 1.0 means current assets exceed current liabilities; below 1.0, the reverse. There is no single right number: it depends on the business and on how soon its cash turns over. What matters more is the trend over several periods and what changes it.
Illustration only, invented figures: the restaurant above plans a $40,000 patio build-out. Paid from cash, it would lower current assets to $12,000 and the ratio to 0.20. Financed with a term loan, only the first year's payments would count as current liabilities, and cash would stay on hand (our arithmetic).
A line of credit adds its drawn balance to current liabilities when drawn, which is why partners look at the ratio before and after the expected draws. See business line of credit and, when ready, the request form.
By Flintview Business Capital · Updated