The current ratio compares what you can quickly turn into cash against what you owe in the near term.
The current ratio is current assets divided by current liabilities, indicating short-term liquidity; a ratio above 1.0 means current assets exceed current liabilities.
It's a quick read on whether an operation can meet near-term obligations, which lenders consider alongside other measures.
$200,000 in current assets against $100,000 in current liabilities is a current ratio of 2.0.
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