What is Current Ratio?
Ability to cover short-term obligations with short-term assets.
How to calculate it
Calculate Current Ratio as: Current assets / Current liabilities. Pull the inputs from your connected data and track the trend over time in your dashboard.
Examples
Example 1
$600k current assets / $300k current liabilities = 2.0, comfortable short-term liquidity.
Example 2
Current assets of $750k against $300k of current liabilities -> 2.5, a comfortable cushion for meeting near-term obligations.
Why it matters
Current ratio measures the ability to cover short-term obligations with short-term assets and gives a quick read on near-term liquidity. It reassures lenders and suppliers that the business can meet its commitments. A very high ratio, though, can signal idle cash or inventory that could be put to more productive use.
Benchmark context
1.5-3.0 is generally healthy; below 1.0 raises liquidity concerns, while well above 3.0 may indicate underused assets. Norms vary by industry.
Common pitfalls
Very high ratios can signal idle assets.
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