current ratio
DefinitionAn indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. Current ratio is equal to current assets divided by current liabilities. If the current assets of a company are more than twice the current liabilities, then that company is generally considered to have good short-term financial strength. If current liablities exceed current assets, then the company may have problems meeting its short-term obligations. For example, if XYZ Company's total current assets are $10,000,000, and its total current liabilities are $8,000,000, then its current ratio would be $10,000,000 divided by $8,000,000, which is equal to 1.25. XYZ Company would be in relatively good short-term financial standing.
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current ratio is ...
... part of the Accounting and Investor Relations subjects.
... part of the Accounting and Investor Relations subjects.
... #10 on our list of the most popular terms.
... an essential investing term.
Related Terms
interval measure
current ratio appears in the definitions of these other terms on BusinessDictionary.com
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