As measured by scheduled debt payment (principal, interest and capital lease).If your current ratio is high, consider investing in assets with higher returns. Current assets usually generate lower returns than other assets. –High current ratios indicate surplus cash. Selling nonessential intermediate or long-term assets (e.g., machinery and investments). Refinancing existing debt with longer repayment terms.Ģ. –Remedies for profitable businesses include:ġ. –A persistently low current ratio indicates a major cash flow problem. A competitive dairy farm must pay its bills and keep its bank obligations up to date. A current ratio above 1.0 indicates a farm has more current assets than current liabilities. Cash shortfalls may occur because of disease outbreaks, lower than expected milk production, lower milk prices or higher input prices. Current assets normally are converted to cash during the year (e.g., cash, stocks, bonds, feeder livestock, accounts receivable and inventories, such as feed).Ĭurrent liabilities are financial responsibilities that will fall due within one year of the date of the balance sheet (e.g., accounts payable, operating loans, principal portion of scheduled loan payments and accrued expenses).Ī business must be able to pay its current obligations and have a cushion for unexpected cash shortfalls.