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What financial information does the current ratio measure?

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What financial information does the current ratio measure?
How does the current ratio relate to other liquidity ratios?

What are some examples of fixed and variable costs in your workplace?

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Solution Summary

Financial information for the current ratio measures are examined.

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What financial information does the current ratio measure?
Current ratio is the most important ration to measure the liquidity position of the organization. It shows the firm's performance and the financial condition of the company. It shows whether the company has enough short term assets to meet its short term liabilities. The standard current ratio is two. If the firm is maintaining a current ratio greater than two, it means that the firm has sufficient short term assets to pay off its liabilities. Even if the current ratio is less than two but greater than one, it indicates that current assets can satisfy the future short term obligation. But if it is less than one, the firm may face ...

Solution provided by:
Sonia Agarwal, CA
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
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