how is the current ratio calculated 
calculating the current ratio is very straightforward simply divide the company s current assets by its current liabilities current assets are those that can be converted into cash within one year while current liabilities are obligations expected to be paid within one year examples of current assets include cash inventory and accounts receivable examples of current liabilities include accounts payable wages payable and the current portion of any scheduled interest or principal payments the bottom linethe current ratio is a useful liquidity measurement used to track how well a company may be able to meet its short term debt obligations it compares the ratio of current assets to current liabilities and measurements less than 1 0 indicate a company s potential inability to use current resources to fund short term obligations 