Current Ratio – The bigger the numerical ratio the better.
This is one of the Liquidity Ratios which lets you know if a company is able to pay its debt. It helps answer the question “Can the company pay its bills?”
Calculate this ratio using the below equation. Values in the equation can be acquired from the Balance Sheet.
Equation:
Current Ratio = (Current Assets) ÷ (Current Liabilities)
Equation results indicate whether there are sufficient short-term liquid assets to cover the firm’s short-term debt.