Current Ratio

What is the Current Ratio?

The Current Ratio is a financial ratio that measures the ability of a company to pay its short-term obligations (less than a year).

Current Ratio formula

The formula to calculate the current ratio is:

Current Ratio = Current Assets / Current Liabilities

When a company has a current ratio of less than 1, this means that the company cannot meet its short-term obligations because the current assets are not sufficient to cover the current liabilities.

Current assets and current liabilites can be found on the balance sheet to calculate the current ratio.

Current ratios by industries

Current ratios can be different across industries. You can find average and median current ratios by industry in the US on this website.