# Current ratio

> Current assets divided by current liabilities, on the same balance sheet date.

Updated Oct 17, 2026.

The current ratio compares what a company expects to turn into cash within a year with what it must pay within a year.

## Formula

```
current ratio = current assets / current liabilities
```

Both are as reported, on the same balance sheet date. See [current assets](/glossary/current-assets) and [current liabilities](/glossary/current-liabilities).

## Reading it

- A ratio above 1 means current assets exceed current liabilities.
- Higher is not always better. A very high ratio can mean cash or inventory is sitting idle.
- Lower is not always worse. Businesses that collect from customers before they pay suppliers, such as many retailers and subscription companies, can run comfortably below 1.
- Current assets include inventory, which may take time to sell or be worth less than its book value.

## When it says "not reported"

Banks, insurers and some other financial companies present an unclassified balance sheet, with no split between current and non-current items, so neither figure exists. The ratio is also not shown when either figure is missing or current liabilities are zero.

## Related terms

- [Current assets](/glossary/current-assets.md)
- [Current liabilities](/glossary/current-liabilities.md)
- [Cash and equivalents](/glossary/cash-and-equivalents.md)

All terms: [/glossary.md](/glossary.md)