Accounting Glossary

Current Ratio

Definition

A liquidity ratio that measures a company's ability to pay short-term obligations using its short-term assets. A ratio above 1.0 means current assets exceed current liabilities.

Formula

Current Ratio = Current Assets ÷ Current Liabilities

Example

Current Assets of $300,000 ÷ Current Liabilities of $150,000 = Current Ratio of 2.0

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