Current Ratio

Current Ratio

Current Assets (CA)

Current Liabilities (CL)

 

Benchmark: 0.7

Current assets divided by current liabilities i.e. the ability (in theory) of a company to meet its short term debt on demand, for instance, if it went into receivership.

Strictly speaking this ratio should be greater or equal to 1, although in practice a much lower value is widely accepted (one of the effects of Just-In-Time).