Term of the Day current ratio Indicator of a firm's ability to meet short-term financial obligations, it is theratio of current assets to current liabilities. Though every industry has itsrange of acceptable current-ratios, a ratio of 2:1 is considered desirable in most sectors. Since inventory is included in current assets, acid test ratio is a more suitable measure where salability of inventory is questionable. Formula: Current assets/Current liabilities. Learn more about this term Usage Example Also known as the liquidity ratio, the current ratio measures whether a firm has enough resources to pay its debts over the next year.   Friday Quiz Challenge Test your knowledge of this week's terms Question: After noticing that the product had some faulty features, the product maker announced a... Choose the Right Answer: (A) success (B) diversity (C) recall (D) consumer price index (CPI)   Featured Article Mom & Pop Entrepreneur Success Stories For many people, the dream of owning their own business and becoming their own boss motivates them to take action. Some turn to the internet and... Read this article   Voice Your Opinion What do you wish you had known ten years ago?   Take us with you! Download the BusinessDictionary app today.