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Current ratio by industry

In financial analysis, the current ratio stands as a key metric, offering insights into a company's short-term liquidity and overall financial health. Calculated by dividing a company's current assets by its current liabilities, this ratio not only highlights a firm's ability to cover its short-term obligations with its short-term assets but also serves as a litmus test for financial stability.

The formula for calculating the current ratio is derived by dividing current assets by current liabilities.

Current ratio = Current Assets / Current Liabilities

For investors and analysts alike, understanding the current ratio is essential for gauging the immediate solvency of publicly traded companies across different industries.

Understanding the Current Ratio in Different Industries

The current ratio varies significantly across industries, reflecting the diverse operational and financial structures inherent to each sector. This variation underscores the importance of industry benchmarks in financial analysis, as what constitutes a healthy current ratio in one industry may signal financial distress in another. For instance, industries that operate with high inventory levels or longer receivable cycles might naturally exhibit higher current ratios, while those with quick turnover rates or lower capital requirements might show lower ratios.

Average Current Ratio by Industry

The average Current ratio varies significantly by industry. Here is a table showing average Current ratios by industries in the US as of Jul 2025:

IndustryAverage current ratioNumber of companies
Advertising Agencies1.3523
Aerospace & Defense2.4452
Agricultural Inputs2.0811
Airlines0.6911
Aluminum1.874
Apparel Manufacturing2.2816
Apparel Retail1.6529
Asset Management2.9577
Auto Manufacturers1.6213
Auto Parts1.8243
Auto & Truck Dealerships1.2813
Beverages - Non-Alcoholic1.8512
Beverages - Wineries & Distilleries1.986
Biotechnology5.28487
Broadcasting1.8514
Building Materials2.248
Building Products & Equipment2.3327
Business Equipment & Supplies1.587
Capital Markets1.8736
Chemicals2.0418
Coking Coal2.234
Communication Equipment1.9742
Computer Hardware1.9925
Conglomerates1.8112
Consulting Services1.6817
Consumer Electronics1.311
Copper2.544
Credit Services1.9843
Department Stores1.624
Diagnostics & Research3.1759
Discount Stores1.248
Drug Manufacturers - General1.2212
Drug Manufacturers - Specialty & Generic2.5943
Education & Training Services1.8517
Electrical Equipment & Parts2.3141
Electronic Components2.632
Electronic Gaming & Multimedia2.157
Electronics & Computer Distribution2.036
Engineering & Construction1.4730
Entertainment137
Farm & Heavy Construction Machinery2.0720
Farm Products1.7515
Financial Data & Stock Exchanges1.3211
Food Distribution1.649
Footwear & Accessories2.0711
Furnishings, Fixtures & Appliances2.0121
Gambling1.468
Gold2.1629
Grocery Stores1.310
Healthcare Plans1.2211
Health Information Services2.6133
Home Improvement Retail1.317
Household & Personal Products1.6826
Industrial Distribution2.5517
Information Technology Services1.6552
Insurance Brokers1.4412
Integrated Freight & Logistics1.4114
Internet Content & Information2.1641
Internet Retail1.7124
Leisure1.6724
Lodging0.699
Luxury Goods1.845
Marine Shipping1.7524
Medical Care Facilities1.739
Medical Devices4.1593
Medical Distribution1.576
Medical Instruments & Supplies3.5343
Metal Fabrication2.6312
Oil & Gas Drilling1.677
Oil & Gas E&P0.9760
Oil & Gas Equipment & Services1.8947
Oil & Gas Integrated1.015
Oil & Gas Midstream1.2334
Oil & Gas Refining & Marketing1.417
Other Industrial Metals & Mining1.7417
Other Precious Metals & Mining2.3310
Packaged Foods1.8542
Packaging & Containers1.6118
Paper & Paper Products2.275
Personal Services1.1110
Pharmaceutical Retailers1.446
Pollution & Treatment Controls2.510
Publishing1.017
Railroads1.328
Real Estate Services1.4424
Recreational Vehicles2.0714
REIT - Specialty1.1616
Rental & Leasing Services1.5919
Resorts & Casinos0.9216
Restaurants0.9643
Scientific & Technical Instruments2.4123
Security & Protection Services1.7114
Semiconductor Equipment & Materials3.6525
Semiconductors2.9164
Software - Application1.87180
Software - Infrastructure1.7295
Solar1.7614
Specialty Business Services1.5226
Specialty Chemicals2.1344
Specialty Industrial Machinery2.0377
Specialty Retail1.3838
Staffing & Employment Services1.8923
Steel2.6413
Telecom Services1.2832
Thermal Coal2.088
Tobacco1.935
Tools & Accessories2.5710
Travel Services0.8610
Trucking1.3112
Utilities - Diversified0.9515
Utilities - Regulated Electric0.8724
Utilities - Regulated Gas0.8714
Utilities - Regulated Water0.8913
Utilities - Renewable1.3210
Waste Management1.3611

As shown in the table, the Biotechnology industry has the highest average Current ratio of 5.28, followed by Medical Devices at 4.15. In contrast, the Airlines industry has the lowest average Current ratio of 0.69, followed by the Lodging industry at 0.69. This variation is due to several factors, including industry-specific risks, turnover rates, and capital requirements.

Industries with highest Current Ratio

Industries with the highest Current ratio are shown in the following chart and table. You can filter the industries by sector in the chart below to see a breakdown of the top industries with the highest Current ratio for every sector.

IndustryAverage current ratioNumber of companies
Biotechnology5.28487
Medical Devices4.1593
Semiconductor Equipment & Materials3.6525
Medical Instruments & Supplies3.5343
Diagnostics & Research3.1759
Asset Management2.9577
Semiconductors2.9164
Steel2.6413
Metal Fabrication2.6312
Health Information Services2.6133

Industries with lowest Current Ratio

The following chart and table present industries with the lowest current ratio. Within the chart below, you can also refine the industries by sector, allowing you to observe a breakdown of the top industries with the lowest Current ratio in each sector.

IndustryAverage current ratioNumber of companies
Airlines0.6911
Lodging0.699
Travel Services0.8610
Utilities - Regulated Electric0.8724
Utilities - Regulated Gas0.8714
Utilities - Regulated Water0.8913
Resorts & Casinos0.9216
Utilities - Diversified0.9515
Restaurants0.9643
Oil & Gas E&P0.9760

Understanding the Current Ratio in Different Industries

The current ratio varies significantly across industries, reflecting the diverse operational and financial structures inherent to each sector. This variation underscores the importance of industry benchmarks in financial analysis, as what constitutes a healthy current ratio in one industry may signal financial distress in another. For instance, industries that operate with high inventory levels or longer receivable cycles might naturally exhibit higher current ratios, while those with quick turnover rates or lower capital requirements might show lower ratios.

Industry Analysis

Manufacturing: The manufacturing sector, known for its capital-intensive nature, often showcases higher current ratios. This reflects the necessity to maintain substantial inventory levels and manage receivables effectively to meet production demands and sales cycles.

Retail: Retailers typically maintain higher inventory levels to ensure product availability, influencing their current ratios. However, the sector's ability to quickly turn over inventory can mitigate the impact on liquidity, presenting a balanced view of its financial health.

Technology: With minimal physical inventory and rapid asset turnover, the technology sector often features lower current ratios. This reflects a streamlined operation that relies more on intangible assets and quick revenue generation.

Utilities: The utility sector usually exhibits lower current ratios, attributed to its stable cash flow and predictable operational expenses. The sector's reliance on long-term financing for infrastructure projects also impacts its current ratio.

Healthcare: Healthcare's financial dynamics, including insurance receivables and equipment investments, contribute to its current ratio. The sector must balance substantial assets against liabilities, including short-term obligations tied to operational needs.

Factors Influencing the Current Ratio

Several factors can influence the current ratio within industries, including:

  • Operational Cycles: The length of a company's operational cycle, from inventory purchase to sales realization, plays a significant role in determining its liquidity needs and, consequently, its current ratio.
  • Capital Structure: Industries relying more on short-term financing will have higher current liabilities, affecting their current ratios. Conversely, sectors utilizing long-term financing may show a more stable current ratio.
  • Seasonality: Seasonal variations in sales and inventory levels can lead to fluctuations in the current ratio, especially in sectors like retail and agriculture, where seasonal demand impacts operational dynamics.

Investment Insights from the Current Ratio

Investment Analysis: The current ratio aids investors in identifying companies with strong liquidity within industry contexts. A higher ratio may suggest financial stability, but industry norms must guide interpretation. For instance, a high ratio in manufacturing might indicate robustness, while in technology, lower ratios are common due to quicker asset turnover.

Limitations: The current ratio's utility is limited by its surface-level analysis. It doesn't reflect asset quality, cash flow timing, or long-term strategies. Investors should beware of high ratios padded by slow-moving inventory or non-liquid assets, emphasizing the need for a holistic analysis beyond just liquidity metrics.

The current ratio offers a snapshot of a company's short-term financial health, which is essential for liquidity analysis across industries. However, its interpretation requires context and complements from other financial metrics. Investors should remain vigilant to industry-specific dynamics and broader economic trends affecting liquidity measurements.