Whether near-term cash covers what is due within a year
The current ratio compares assets that turn into cash within a year against liabilities due within a year. Below 100% suggests short-term payments may not be covered. Healthy levels differ by sector; cash-based retailers run comfortably on lower numbers. Companies fail not when they post a loss but when the money to pay runs out.
Current assets of $150 million against current liabilities of $100 million is a ratio of 150%.
For learning, not investment advice. Decisions are your own.
StockFit · TrueNorthLabs Inc.