Advanced Corporate Finance
The current ratio is a financial metric that measures a company's ability to pay its short-term liabilities with its short-term assets. It is calculated by dividing current assets by current liabilities, indicating whether a business has enough resources to cover its immediate obligations. A higher current ratio suggests better liquidity and financial health, which is important for understanding cash flow dynamics, evaluating financial stability, managing liquidity, addressing short-term financing needs, and assessing the risk of bankruptcy or financial distress.
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