Current ratio

Lenders need to know that Go Faster will be able to repay any credit they are given in the short-term. The company provides information on its ability to meet its short-term debts by publishing its current ratio [Current ratio: The ability to meet short-term debts. ]. This assesses how many times it could afford to pay its current liabilities out of its current assets. Here is the equation you should learn:

current ratio = ^{current assets}/ _{current liabilities}

This ratio shows us that it could afford to pay its liabilities six times from its current assets.