Plain-English definitions, reviewed by an independent investor
Current Ratio
The current ratio measures short-term solvency: current assets over current liabilities.
The current ratio measures short-term solvency: current assets over current liabilities.
Current Ratio = Current Assets ÷ Current Liabilities
Why it matters
It is a quick health check on paying the bills this year.
Common confusion
A very high ratio can mean idle assets; a low one signals strain.
Frequently Asked Questions
What is a good current ratio?
Around 1.5–2 is often healthy, but it varies by industry.
Current vs quick ratio?
Quick strips out inventory, which may be slow to sell.