What is the current ratio in finance?
An example of an AI chatbot conversation about the current ratio in finance.
What is the current ratio in finance?
The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets.
How do you calculate the current ratio?
You calculate the current ratio by dividing current assets by current liabilities. The formula is: Current Ratio = Current Assets / Current Liabilities.
What does a current ratio of less than 1 indicate?
A current ratio of less than 1 indicates that a company may have liquidity issues, as it has more current liabilities than current assets.
What is considered a healthy current ratio?
A healthy current ratio typically ranges from 1.5 to 2, indicating that a company has sufficient assets to cover its liabilities.
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