What is a current ration and why it's important?

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Accepted Answer

Current ratio is a financial ratio that measures a company's ability to pay its short-term liabilities with its short-term assets.

Current ratio is calculated by dividing current assets by current liabilities.
A higher current ratio indicates that a company has more current assets than current liabilities, which means it can easily pay off its short-term debts.
A lower current ratio indicates that a company may have difficulty paying off its short-term debts.
For example, if a company has $100,000 in current assets and $50,000 in current liabilities, its current ratio would be 2:1.
A current ratio of 2:1 is generally considered to be a good ratio, but it can vary depending on the industry and the company's specific circumstances.

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