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Accounting
Current Ratio
Current assets divided by current liabilities — a quick test of whether a company can pay its short-term bills.
The current ratio is one of the first numbers bankers and investors look at on the balance sheet. Too high can mean the company is sitting on too much cash instead of investing it; too low means possible liquidity problems.
It's the 'can we pay next month's rent and salaries?' check.
Real world: A current ratio of 2.0 means the company has £2 of current assets for every £1 of current liabilities. Below 1.0 is often a warning sign that the company might struggle to pay its immediate bills.
💡 A healthy current ratio keeps the lights on — too low and the business can run out of cash even if it’s profitable.