# Current Ratio

**Definition:** Ratio of a business's current assets to its current liabilities. Current ratio is a measure of solvency, it is determined by dividing current assets by current liabilities. This ratio includes the va**Definition:** lue of inventories, so use the acid test ratio for a precise determination of current assets/liabilities coverage.
**Definition:** [crh] Indicator of short-term debt-paying ability. Determined by dividing current assets by Definition: REF="/?rd=current+liabilities">current liabilities. The higher the ratio, the more liquid the company.

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