Fundamental Glossary / Debt & Financial Stability
Current Ratio
Current assets divided by current liabilities.
Formula
Current assets / current liabilities.
What it means
A ratio above 1 means current assets exceed current liabilities on the reporting date. It is the oldest liquidity test.
A very high ratio can mean idle cash or slow stock, not virtue. A ratio below 1 can be normal for a retailer that turns stock quickly and pays suppliers late.
How to read it
Compare with the company's own history and with peers. A drop from 1.8 to 1.1 is more informative than the 1.1 by itself.
What to watch
Inventory quality and the collectability of receivables decide whether the ratio can be turned into cash. The quick ratio removes inventory for that reason.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.