Current Ratio
Definition
A liquidity ratio that measures a company's ability to pay its short-term liabilities using its short-term assets. Formula: Current Assets ÷ Current Liabilities. The ideal ratio is 2:1.
Example
"Current Assets = ₹4 Lakhs, Current Liabilities = ₹2 Lakhs → Current Ratio = 2:1, indicating the company can cover every ₹1 of current liability with ₹2 of current assets."