Current Ratio
What It Measures
Can the company pay its bills due soon? This compares what they own vs what they owe in the short term.
Formula
Current Ratio = Current Assets ÷ Current LiabilitiesCurrent Assets = Cash, receivables, inventory. Current Liabilities = Debt and payables due within 1 year.
Why It Matters
Tells you if a company can cover its near-term bills. A ratio below 1 means they might struggle to pay what they owe.