Current Ratio and Primary Residence
Course: Fundamentals of Financial Planning
Lesson 3: Personal Financial Statements
Student Question:
What role does the client’s primary residence play in the current ratio calculation? Is
their outstanding mortgage loan amount considered a liability?
Instructor Response:
That’s a great question. The residence is not considered a liquid asset and is excluded from “assets” for the current ratio. Only debt maturing within the next twelve months is considered a liability.