An indication of a firm's ability to meet short-term debt obligations; the higher the ratio, the more liquid the firm is. Current ratio is equal to current assets divided by current liabilities. If the current assets of a firm are more than twice the current liabilities, then that firm is generally considered to have good short-term financial strength. If current liablities exceed current assets, then the firm may have problems meeting its short-term obligations. For example, if XYZ Firm's total current assets are $10,000,000, and its total current liabilities are $8,000,000, then its current ratio would be $10,000,000 divided by $8,000,000, which is equal to 1.25. XYZ Firm would be in relatively good short-term financial standing.