Current Ratio

Definition

  • A ratio used to measure a company's liquidity and relative ability to pay for short-term obligations. Also know as "liquidity ratio", "cash asset ratio", and "cash ratio", the current ratio is derived by dividing the company's current assets by its current liabilities.

Synonyms
liquidity ratio, cash asset ratio, cash ratio

Related Terms and Acronyms

  • Acid-Test Ratio Definition,
    • A ratio that determines the liquidity of a company without requiring the company to sell assets or inventory.
  • Liquidation Definition,
    • To convert into cash.
    • The practice of selling or redistributing some or all of a business's assets in order to repay debts or pay investors if the business becomes insolvent or is sold in full or in part.
    • To settle the outstanding debts by selling property.
  • Overall Liquidity Ratio Definition,
    • A method of determining how easily and quickly a company can sell off assets to pay off its debts.
  • Quick Liquidity Ratio Definition,
    • A metric used to find if a company has enough liquidity to make it's short term financial obligations.
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