Series 79: Current Ratio (Working Capital Ratio)

Current Ratio (Working Capital Ratio)

The current ratio, also known as the working capital ratio, measures a company’s ability to pay short-term obligations using short-term assets. The ratio is expressed as follows:

(Current assets and current liabilities are listed on the balance sheet.)

A high current ratio suggests that the company has no liquidity issues and is likely able to pay its debts over the next year as they come due. A current ratio that is close to or below 1.0 may be a danger signal that the company could experience difficult