The Current Ratio, also known as the working capital ratio, measures a company's liquidity, specifically its ability to pay off short-term obligations with available short-term assets. It is calculated by dividing current assets by current liabilities. For example, if a company has $200,000 in current assets and $100,000 in current liabilities, its current ratio is 2, indicating it has 2 dollars in assets for every dollar in liabilities.

A current ratio greater than 1 suggests that the company can pay its obligations comfortably, while a ratio less than 1 may indicate potential liquidity issues. However, an excessively high Current Ratio might also indicate inefficiencies in utilizing resources.

In practice, the interpretation of the Current Ratio depends on the industry norms and the specific context of the company. For instance, a retail company may have a lower acceptable ratio compared to a utility company. Regular monitoring of this ratio can provide insights into the company's financial health and is often considered in financial analyses in conjunction with terms like Accounts Payable and Balance Sheet.