Description
How do you gauge the financial health of a company? One way is to determine if a company has a sufficient amount of liquid, short term assets to meet its near term obligations (debt, etc.). The current ratio measures this by comparing current assets to current liabilities.
Calculation
What it Means
A current ratio of less than 1 might indicate that a company carries too much debt, such that it can’t meet is short term obligations with its short term assets.