Indicator of a firm's ability to meet short-term financial obligations, it is the ratio of current assets to current liabilities. Though every industry has its range of acceptable current-ratios, a ratio of 2:1 is considered desirable in most sectors. Since inventory is included in current assets, acid test ratio is a more suitable measure where salability of inventory is questionable. Formula: Current assets รท Current liabilities.
Use 'current ratio' in a Sentence
I was reviewing the company's financial statements and ratios and noticed the current ratio seemed high so I naturally opened the company's balance sheet.
In order to figure out the problem, Kevin had to figure out the current ratio between the amount of items and the amount of items sold.
When trying to decide how much to sell your product for you can try and use the current ratio to dictate supply and demand.
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