1. Finance
  2. Liquidity & Solvency

Current Ratio


Measures a company's ability to pay off its short-term liabilities with short-term assets. A current ratio below 1 suggests that the company might have problems meeting its short-term obligations if they came due at once.


Current Assets / Current Liabilities


If a company has current assets of $1,000,000 and current liabilities of $500,000, its current ratio is 2:1.