Definition: What is Current Ratio?
Current Ratio is the liquidity and efficiency ratio which is used to measure the ability of the company to pay off its short term liabilities with its current assets. It is an important liquidity measurement because of short term liabilities due within the next year.
The company has less time to raise the fund to pay the liabilities. Current assets can easily be converted into cash in a short time. So the companies which have a large amount of current asset can easily pay off current liabilities.
With less current asset company have a problem to pay the liabilities within a short time. You can learn about Current Ratio Formula as well.
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