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.

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There’s no universal safe or danger level. Ideal current ratios vary by industry. A current ratio of 1.0 means the company has $1 in current assets for every $1 in current liabilities. A ratio below 1 ...

A fundamental flaw in U.S. GAAP and IFRS financial reporting standards distorts the calculation of working capital and the current ratio, resulting in a significant understatement in most companies’ ...