Current Ratio

The Current Ratio is a financial metric that measures a company’s ability to pay off its short-term liabilities with its short-term assets. It is calculated by dividing current assets by current liabilities. A ratio above 1 indicates the company has more current assets than current liabilities, suggesting good short-term financial health and liquidity. Conversely, a ratio below 1 may signal potential liquidity issues, as the company may struggle to meet its short-term obligations. The current ratio helps investors and creditors assess the company’s operational efficiency and financial stability in the near term.