Current ratio

Definition

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year with its current assets. It is calculated by dividing the total current assets by the total current liabilities.

Related terms

Current Assets:

Assets that a company expects to convert into cash within one year or one business cycle, whichever is longer.

Current Liabilities:

Obligations or debts that a company must pay within one year or within one business cycle, whichever is longer.

Liquidity Ratios: Financial metrics used to assess a company's ability to meet its short-term debt obligations