Measures a business's ability to pay its short-term debts using its short-term assets. Formula: Current Assets ÷ Current Liabilities. A ratio above 1.0 means the business has more short-term assets than short-term debts. Generally, 1.5–2.0 is considered healthy.
How to calculate it
Current ratio = current assets ÷ current liabilities. This checks short-term coverage on paper but does not measure the speed of collections or sales of inventory.
If current assets are $160,000 and current liabilities are $100,000, the ratio is 1.60.
Where this connects to Impresa
You may encounter this concept when reviewing Financial Health. Start with the underlying inputs and check the applicable reporting period before interpreting the result.
Read the Financial Health guideDefinitions here explain the concept. Accounting treatments, formulas, and industry comparisons may vary. Use your own records and qualified advice for material decisions.