Current Ratio
Liquidity measure comparing current assets to current liabilities.
Formula
Current Ratio = Current Assets ÷ Current Liabilities
Real World
Supermarkets like Sainsbury's typically operate with a current ratio below 1 — around 0.6 — because they collect cash from customers daily but pay suppliers on 30–60 day terms.
Exam Focus
Always contextualise the ratio to the industry; a ratio below 1 is not automatically bad — examiners penalise generic 'higher is always better' answers.
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