---
title: "Definition of Current Ratio"
url: https://signalscreener.fr/definition/current-ratio/
markdown_url: https://signalscreener.fr/definition/current-ratio.md
description: "Current Ratio measures if a company can pay short-term obligations with short-term assets."
type: glossary-definition
site: Signal Screener
language: en
keywords:
  - "Current Ratio"
translations:
  es: https://signalscreener.fr/es/definition/current-ratio.md
  fr: https://signalscreener.fr/fr/definition/current-ratio.md
  pt: https://signalscreener.fr/pt/definition/current-ratio.md
  zh: https://signalscreener.fr/zh/definition/current-ratio.md
---

# Current Ratio

## What is Current Ratio?

Current Ratio measures if a company can pay short-term obligations with short-term assets. Above 1 means more current assets than current liabilities.

## Think of it like this

Your monthly bills are $3,000. You have $4,500 in checking/savings. Your current ratio is 1.5 - you can cover bills with cushion left over!

## Formula

```
Current Ratio = Current Assets / Current Liabilities
```

- **Current Assets**: Cash + assets convertible to cash within 1 year
- **Current Liabilities**: Bills due within 1 year

## Why it matters

- Shows short-term financial health
- Can company pay its bills?
- Important for suppliers and creditors
- Red flag if below 1

## What's a good value?

| Range | Rating | What it means |
|---|---|---|
| < 1.0 | Risky | May struggle to pay bills |
| 1.0-1.5 | Adequate | Can cover obligations |
| 1.5-3.0 | Healthy | Good financial cushion |
| > 3.0 | Very Safe | Lots of liquidity, but might be inefficient |

## Real-world example

Amazon current ratio: 1.1 - operates efficiently with low inventory. Apple: 1.0 - just-in-time operations. Struggling retailer: 0.7 - may miss payments.

## Things to watch out for

- Inventory might not be liquid
- Quality of receivables matters
- Too high might mean inefficiency
- Industry norms vary significantly

---

This is educational content, not financial advice.

Source: [Definition of Current Ratio](https://signalscreener.fr/definition/current-ratio/) on Signal Screener. Free to quote and cite with attribution and a link to that URL, which is the canonical one.

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