Definition: The current ratio measures a company's ability to meet its current financial obligations by dividing its current assets (such as cash, accounts receivable, etc.) by its current liabilities.
Advice: The current ratio is a good way to determine a company's current financial health. If a company's balance sheet looks kinda nasty and the current ratio is low, the company may have to default on its debt in the near future. When that happens, the company will go bankrupt.