Your website made sales this month.
Now answer this: can you pay everything you owe in the next 12 months?
Most owners can't say. One number tells you in 2 minutes.
Current ratio = current assets ÷ current liabilities
What goes on top (current assets):
→ Cash
→ Money customers still owe you
→ Stock (inventory)
→ Prepaid costs, like an annual software plan
What goes on the bottom (current liabilities):
→ Supplier bills
→ Short-term loans or credit lines
→ Unpaid wages
→ Taxes you owe
→ Gift cards and store credit customers haven't used yet
Shopify's own example: $145,000 in assets ÷ $70,000 in liabilities = 2.07.
How to read yours:
Below 1 → you owe more than you hold. Trouble.
1.5 to 2 → healthy range (US Chamber of Commerce, via Shopify)
3.5+ → cash may be sitting idle, or stuck in stock that won't sell
Here's the part nobody tells you.
Cash: $5,000
Stock: $45,000
Bills due this year: $25,000
(5,000 + 45,000) ÷ 25,000 = 2.0. Looks great.
But stock isn't cash. Take it out and it's $5,000 against $25,000. That's 0.2.
So run 2 more checks:
Quick ratio = same math, no stock, no prepaid costs
Cash ratio = cash only (the strictest test)
Ways to push the number up:
1. Sell slow stock, even at a discount
2. Ask suppliers for longer payment terms
3. Collect what you're owed faster
4. Don't let spare cash sit idle
5-minute check tonight:
1. Write down your cash, stock and money owed to you
2. Write down your bills due this year
3. Divide
It's a snapshot, so run it often. Compare it with similar businesses, not with a giant.
Do you know your number? Tell me yours (or just the range) below.
#Ecommerce