This week, I'm focusing on another ratio to help gauge a company's financial health: the Current Ratio.

It's calculated by dividing current assets by current liabilities.

The higher the ratio, the more liquid assets a company has to meet its short term obligations.

A ratio of 2 or more (meaning a company has at least twice as many short-term assets than short-term liabilities) is generally considered good.

Presently, the median current ratio for the stocks in the S&P 500 is 1.65.

How to Use

Screening for this is quite easy to do.

You can screen for this on Zacks' free custom screener on Zacks.com.

Once there, select the 'Liquidity and Coverage' Category. Then choose the 'Current Ratio' in the Criteria section. (See the image below.)

You can also take it a step further by using the Research Wizard to screen for companies with Current Ratios that are better (i.e., higher) than the average or median for their industry. Or you can even specifically focus on the Sectors and Industries with the best Current Ratios (which again, is a measure of financial strength) and then pick companies from those groups.

In this week's screen, we'll use the Current Ratio as the main focus and add other logical items to produce a stock list of sound companies with solid prospects for the future.

Screen Parameters

• Price greater than or equal to $5

• Volume greater than or equal to 100,000

• Zacks Rank less than or equal to 2

(Only Buys and Strong Buys allowed.)
• Projected Growth Rate greater than median for its respective X Industry
  (This means we're looking for the companies with the best growth rates within their groups.)

• Current Ratio greater than median for its respective X Industry
  (Looking at the companies with the strongest liquid positions to meet their short-term financial obligations.)

• Current ratio greater than 2
  (At the very least, we want the companies to exceed the commonly held definition of good, which means greater than 2.)

Here are 5 stocks that passed this week's screen:

( HXL - Snapshot Report ) Hexcel Corp. - current ratio: 2.65
( MDC - Snapshot Report ) MDC Holdings, Inc. - current ratio: 9.55
( MHK - Snapshot Report ) Mohawk Industries, Inc. - current ratio: 3.27
( SPF - Snapshot Report ) Standard Pacific Corp. - current ratio: 8.86
( TDG - Analyst Report ) TransDigm Group, Inc. - current ratio: 3.88

Start using this financial strength ratio in your own screening to help you find the stocks best able to prosper during these tough financial times. Start putting these ideas and others to the test today. Sign up now for a 2-week trial to the Research Wizard and start screening and backtesting your strategies before your next trade. You can do it.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance.