Liquidity Ratio
Financial ratio measuring ability to pay short-term debts.
Formula
Current Ratio = Current Assets / Current Liabilities
Real World
During the Covid-19 pandemic, airline easyJet's current ratio fell sharply as ticket revenue dried up while lease and fuel obligations remained, forcing it to raise emergency equity.
Exam Focus
Quote the benchmark (current ratio ~1.5–2:1; quick ratio ~1:1) and explain what a figure above or below suggests about the business.
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