Current Ratio

The current ratio is a financial metric that measures a company's ability to pay its short-term obligations with its short-term assets. It is calculated by dividing current assets (cash, inventory, receivables) by current liabilities (debts due within a year). A ratio above 1 indicates the company has enough assets to cover its immediate debts, suggesting good short-term financial health. Conversely, a ratio below 1 may signal potential liquidity issues. It helps investors and creditors assess whether a company can meet its upcoming financial commitments comfortably.