Current Ratio
Definition
A liquidity ratio measuring a company's ability to pay short-term obligations, calculated as current assets divided by current liabilities.
Explanation
A current ratio above 1.0 means the company has more short-term assets than short-term liabilities. Generally, 1.5-2.0 is considered healthy. Below 1.0 may indicate liquidity risk. However, context matters: retail companies with fast inventory turnover operate successfully with lower ratios, while cyclical businesses need higher buffers. The quick ratio (excluding inventory) provides a more conservative liquidity measure.
Formula
Current Ratio = Current Assets / Current Liabilities
How Stoquity Uses This
Stoquity incorporates current ratio analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.