What is Current Ratio?
The current ratio is a liquidity ratio calculated by dividing a company's current assets by its current liabilities. It indicates the company's ability to cover short-term obligations with its short-term assets.
The current ratio is a liquidity ratio calculated by dividing a company's current assets by its current liabilities. It indicates the company's ability to cover short-term obligations with its short-term assets.
Introduction: The current ratio, a critical financial metric, measures a company's ability to pay off its short-term liabilities with its short-term assets. This liquidity ratio, expressed as a numerical value, is instrumental in assessing the financial health and operational efficiency of a business. A higher current ratio indicates that a company possesses sufficient assets to cover its short-term obligations, a key consideration for investors, creditors, and management in evaluating a company's stability and risk profile.
Calculating the Current Ratio:
Current Ratio = Current Assets / Current Liabilities
Components of the Current Ratio:
Significance of the Current Ratio:
Optimizing the Current Ratio: