A liquidity measure calculated as current assets divided by current liabilities.
For example, a construction company has $180,000 in current assets and $90,000 in current liabilities, giving it a current ratio of 2.0 — meaning it has twice as many short-term assets as short-term obligations, which most lenders consider a healthy liquidity position.
Why it matters: It is the standard measure of short-term financial health; a ratio below 1.0 suggests an impending cash crunch.
.avif)
.svg){kind=small}