What is the current ratio? The current ratio, sometimes referred to as the working capital ratio, is a metric used to measure a company's ability to pay its short-term liabilities, or those due ...

while a lower ratio might signal underutilization of available resources. Companies using just-in-time operations can run with minimal working capital by ordering inventory only when needed.

For instance, a declining liquidity ratio may indicate deteriorating financial health or inefficient working capital management. However, it may also mean a company is trying to hold onto less ...