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Financial Encyclopedia


Financial Encyclopedia

Current Ratio


Current Ratio reflects the ratio of the value of short-term assets to the value of the company's short-term liabilities.

More detailed

Current Ratio = Current Assets / Current Liabilities

This ratio measures the capability of a business to meet its short-term obligations that are due within a year.
The higher the value of the current liquidity indicator, the higher the liquidity of the company's assets. The optimal value is considered to be a coefficient value of 2 or more. However, for some industries, a decrease in the indicator is allowed, so investors compare the value of the indicator with industry average values.


However, when evaluating a company's liquidity, the current ratio alone doesn't determine whether it's a good investment or not. It's therefore important to consider other financial ratios in your analysis.


According to Ranks methodology, this indicator is analyzed in the Financial position block and used along with other indicators to calculate the score. 

LCC “Ranks”

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