Financial StatementsBeginner
Current Ratio
Current assets divided by current liabilities: a test of short-term liquidity.
Detailed explanation
A ratio above 1 means the company has more short-term assets than short-term obligations.
Formula
Current ratio = Current assets ÷ Current liabilities
Example
₹300 cr ÷ ₹180 cr = 1.67.
Why it matters
Quick check on whether bills can be paid in the next year.
Key points
- Below 1 can signal strain.
- Very high may mean idle cash.
- Quick ratio excludes inventory.
Related terms
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.