2) Fundamental Analysis
Current Ratio answers the most fundamental question: can the company pay its bills coming due soon? If the answer is no, all other metrics become irrelevant.
Current Ratio = Current Assets / Current Liabilities. Current assets = cash, receivables, inventory (convertible to cash within 1 year). Current liabilities = debts due within 1 year. A Current Ratio of 2.0 means the company has 2x the current assets to cover short-term debt.
Imagine you earn Rp10 million/month (current assets) and your monthly bills + installments are Rp5 million (current liabilities). Your current ratio is 2.0 — safe. But if your bills are Rp12 million while salary is Rp10 million, your current ratio is 0.83 — you'll need to borrow more next month. Danger!
Property companies often have low current ratios (<1) due to short-term construction debt. Consumer goods companies like ICBP typically have healthier current ratios (1.5-2.5) thanks to stable daily sales cash flow.
After understanding this concept, apply it in tools so decisions become more objective and measurable.
Open Fair Value CalculatorWhat is the ideal current ratio?
Generally 1.5-3.0 is considered ideal. Below 1.0 is dangerous (unable to pay short-term debt). Above 4-5 might be too conservative. But this depends on sector — retail companies can reasonably have lower current ratios due to fast cash turnover.
