Definition: A liquidity measure calculated by dividing current assets by current liabilities.
Example
Current assets of $120,000 divided by current liabilities of $60,000 produce a current ratio of 2:1.
Keep the distinction clear
The ratio measures short-term coverage, not profitability. The quality and collectability of the current assets also matter.
Related terms
Balance Sheet · Asset · Liabilities
Keep studying
References: FREC Course II syllabus, Session 9
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