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The current ratio is calculated by dividing a company’s current assets by its current liabilities. Ratios of 1 or higher indicate short-term solvency.

Claire Boyte-White is the lead writer for NapkinFinance.com, co-author of I Am Net Worthy, and an Investopedia contributor. Claire's expertise lies in corporate finance & accounting, mutual funds, ...

Understand what the current ratio measures, why it matters, and how to use it to assess and improve short-term liquidity. There’s no universal safe or danger level. Ideal current ratios vary by ...