2 min read
Definition
The current ratio is current assets divided by current liabilities. It measures whether a company has enough short-term resources — cash, debtors, stock — to cover the debts due within a year.
In plain terms
A ratio above 1 means short-term assets exceed short-term bills; below 1 hints at a possible squeeze. It's a snapshot, not the whole story.
Why it matters for your company
Lenders glance at the current ratio to gauge liquidity. Pair it with real cash forecasting for the true picture. See net working capital and cash flow forecasting.
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