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Zale Corp (NYSE:ZLC)
Current Ratio
2.01 (As of Jan. 2014)

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. It is calculated as a company's Total Current Assets divides by its Total Current Liabilities. Zale Corp's current ratio for the quarter that ended in Jan. 2014 was 2.01.

Zale Corp has a current ratio of 2.01. It generally indicates good short-term financial strength.

Definition

The current ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities with its short-term assets.

Zale Corp's Current Ratio for the fiscal year that ended in Jul. 2013 is calculated as

 Current Ratio (A: Jul. 2013 ) = Total Current Assets (A: Jul. 2013 ) / Total Current Liabilities (A: Jul. 2013 ) = 837.22 / 409.684 = 2.04

Zale Corp's Current Ratio for the quarter that ended in Jan. 2014 is calculated as

 Current Ratio (Q: Jan. 2014 ) = Total Current Assets (Q: Jan. 2014 ) / Total Current Liabilities (Q: Jan. 2014 ) = 935.786 / 466.053 = 2.01

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Explanation

The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. Because business operations differ in each industry, it is always more useful to compare companies within the same industry.

Acceptable current ratios vary from industry to industry and are generally between 1 and 3 for healthy businesses.

The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign.

If all other things were equal, a creditor, who is expecting to be paid in the next 12 months, would consider a high current ratio to be better than a low current ratio, because a high current ratio means that the company is more likely to meet its liabilities which fall due in the next 12 months.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Zale Corp Annual Data

 Jul04 Jul05 Jul06 Jul07 Jul08 Jul09 Jul10 Jul11 Jul12 Jul13 current ratio 2.57 2.55 2.60 3.13 2.96 2.29 1.99 1.98 2.11 2.04

Zale Corp Quarterly Data

 Oct11 Jan12 Apr12 Jul12 Oct12 Jan13 Apr13 Jul13 Oct13 Jan14 current ratio 1.97 1.93 2.09 2.11 1.91 2.04 2.07 2.04 2.00 2.01
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