Current ratio looks at the liquidity of the business

Looks at the ratio between Current Assets and Current Liabilities

Current Ratio = Current Assets : Current Liabilities

Ideal level – approx 1.5 : 1

Need enough current assets to cover current liabilities

If its too high means too many current assets e.g. might have too much stock, could use the money tied up in current assets more effectively

If its too low you run the risk of not being able to meet current liabilities and you could have liquidity problems