Current Ratio Calculator - Glossary:

Current Ratio: Shows the proportion of current assets to current liabilities. In simple words, it measures a company's ability to pay the short-term liabilities with its current assets.

Formula:

How to use this equation?

This is a balance sheet component; the values are commonly stated against current assets and current liabilities. To use this ratio, simply divide current assets with current liabilities.

Current Assets:
On the balance sheet, you will find the total value of current assets which consist of cash, cash equivalents, account receivables, merchandise inventory and marketable securities.

Current Liabilities:
On the balance sheet, you will find the total value of current liabilities which consist of accounts payable, tax payable (sales, payroll and other taxes) that are due in short-term.

Example:
Current ratio for a company with total current assets of $200,000 and current liabilities of $155,000 is 1.29:1. It means $1.29 of current assets are available to cover each $1 of its current liabilities.