# Current Ratio

*Accounting & Reporting — Finicade finance glossary*

The current ratio divides current assets by current liabilities — a rough test of whether a company can cover the next year's obligations. Around 1.5–3 is conventionally comfortable, but the number is only as good as the assets inside it: inventory that won't sell and receivables that won't collect both count as current assets right up until they don't.

**Formula:** `Current ratio = Current assets ÷ Current liabilities`

**Also known as:** working capital ratio

**Related terms:** [Quick Ratio](https://finicade.com/glossary/quick-ratio), [Working Capital](https://finicade.com/glossary/working-capital), [Liquidity](https://finicade.com/glossary/liquidity), [Accounts Payable](https://finicade.com/glossary/accounts-payable), [Financial Ratios](https://finicade.com/glossary/financial-ratios)

Source: https://finicade.com/glossary/current-ratio