 The current ratio measures the ability to pay current liabilities with current assets. It's similar in concept to the working capital, but rather than looking at a company's ability in terms of total dollars, the current ratio looks at a percentage or ratio. The current ratio is a measure of liquidity. In general, the larger the current ratio, the better the ability to pay debts. The current ratio is calculated as current assets divided by current liabilities. It tells us how many more dollars of current assets a company has than current liabilities. Generally, current ratios that are greater than 1.5 are considered strong. Here is the current asset and liability section of a sample company's balance sheet. We'll use the highlighted current assets and liabilities to determine the current ratio. For 2015, current assets divided by current liabilities gives us a current ratio of 1.84. For 2016, current assets divided by current liabilities gives us a current ratio of 3.56. Another way to think about this ratio is the company has $3.56 of current assets for every $1 of current liability.