Current ratio
Current ratio is a liquidity ratio; current assets are divided by current liabilities to indicate a company's ability to pay its short-term debt. This ratio does not provide as much certainty as the acid test ratio.
Definitions
According to College Accounting: A Practical Approach by Slater (13th edition),
- Current ratio. A liquidity ratio; current assets are divided by current liabilities to indicate a company's ability to pay its short-term debt. This ratio does not provide as much certainty as the acid test ratio.
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Current ratio. Indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future; it is found by dividing current assets by current liabilities.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Current ratios. This ratio is calculated by dividing current assets by current liabilities. It indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future.
Related concepts
- Accounting (alternatively known as accountancy) is management of financial data, information, and knowledge about financial transactions of legal entities. Accountancy tends to include bookkeeping and, depending on a particilar enterprise, may also include quatitative analysis of financial data in the bookkeeping system and/or business intelligence.
