Definition
The current ratio compares current assets with current liabilities. In a common analytical formula, divide the former by the latter. It helps assess how accounting resources in the current cycle cover near-term obligations, but it does not by itself show when cash will become available.
Example
If current assets are 300 thousand roubles and current liabilities are 150 thousand, the ratio is 2. But if most assets are slow-moving goods, the actual ability to pay may be weaker than the division suggests.
Limitations
There is no universal safe value for every industry. Consider seasonality, sales speed, contractual payment dates and receivable quality. A company’s current liquidity is not the liquidity of its shares on an exchange. With negative or unusual inputs, the calculation needs a separate explanation rather than mechanical comparison with a notional norm.