Current Ratio is a liquidity ratio that measures a company’s ability to pay its short-term liabilities using its short-term assets.
The Current Ratio helps assess whether a company has enough resources to meet its short-term obligations. It compares current assets (cash, inventory, receivables) with current liabilities (payables, short-term debt).
A higher ratio indicates better liquidity, while a very low ratio may signal financial stress.
👉 Current Ratio = Current Assets ÷ Current Liabilities
"If a company has ₹10 lakh in current assets and ₹5 lakh in current liabilities: 👉 Current Ratio = 10 ÷ 5 = 2 (healthy position)"