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Glossary · PSX term

Current ratio.

Current ratio compares current assets with current liabilities. It gives a quick view of short-term liquidity, especially for working-capital-heavy businesses.

Definition

The ratio is calculated as current assets divided by current liabilities. It is useful, but investors should still review inventory quality, receivable collection, and near-term debt maturities.

Worked example

If current assets are Rs. 15 billion and current liabilities are Rs. 10 billion, the current ratio is 1.5x.

Related on PSX Clarity

Term
Debt-to-equity ratio
Term
Free cash flow
Term
Book value

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