What is the Current Ratio?
The current ratio is a liquidity ratio that shows the ratio of current assets to current liabilities.
How to Calculate the Current Ratio
The current ratio is calculated by dividing current assets by current liabilities, both listed on a company’s balance sheet.
How to Interpret the Current Ratio
Investors should look for a current ratio above 1, since it indicates that a company has sufficient liquidity to cover its current liabilities with its current assets.