Liquidity improving
What it measures¶
The current ratio divides current assets — cash and what turns into cash within a year, such as money customers owe and goods in stock — by current liabilities — what the company must pay within a year. This check compares the latest year-end's current ratio with the year before and asks: did it rise?
Why it is on the page¶
A rising current ratio means the company has more short-term resources for each unit of short-term bills than a year ago. Piotroski's checklist counts it as a mark of improving financial health; his study found the change useful in telling stronger from weaker companies. The check compares the company only with its own past.
Thresholds, their source and the population they were fitted on¶
| Result | When |
|---|---|
| ✓ passed | the current ratio is higher than last year (change above 0) |
| ✕ failed | it is the same or lower |
| ○ not evaluable | current assets or current liabilities of either year is not stored |
- Source: Piotroski (2000), the check he called
F_ΔLIQUID. - Fitted on: US companies whose shares were priced low against the equity on their balance sheet, fiscal years 1976–1996.
- Evidence grade: peer-reviewed and replicated.
- Basis: own history.
A worked example¶
Apple, fiscal year 2025 (statements stored on 25 October 2026): the current ratio rose by 0.03 — passed, and the Cash & liquidity tile's reason sentence named it: Liquidity improving (0.03x) meets Δ > 0, vs its own history.
Honeywell International, the same year: it fell by 0.015 — failed, even though the ratio itself (1.30) stayed above the current ratio floor.
What “No verdict” means here¶
The check needs two year-end balance sheets with both current totals. When either is missing — some companies, and some data providers, do not split their balance sheet into current and long-term items — the check is not evaluable, the missing input is named, and it leaves the area's count.
What the verdict is and is not¶
A pass says the short-term cushion grew against last year. A small change either way often comes from the timing of one payment around the year-end, so read it with the level beside it. It is not a forecast and not an instruction to trade the shares.