current ratio definition

current ratio

Indicator of a firm's ability to meet short-term financial obligations, it is the ratio of current assets to current liabilities. Though every industry has its range of acceptable current-ratios, a ratio of 2:1 is considered desirable in most sectors. Since inventory is included in current assets, acid test ratio is a more suitable measure where salability of inventory is questionable. Formula: Current assets ÷ Current liabilities.

current ratio is in the Accounting & Auditing and Banking, Commerce & Finance subjects.

current ratio appears in the definitions of the following terms: acid test ratio and solvency ratios

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