UNDERWRITING GLOSSARY
Current Ratio
Current Ratio
Current assets divided by current liabilities, used to assess short-term liquidity.
What does Current Ratio mean?
Current assets divided by current liabilities, used to assess short-term liquidity. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Current Ratio in context
$900,000 divided by $600,000 produces a 1.5 current ratio.
Why it matters in financing
Current Ratio can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related underwriting terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.