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Current assets divided by current liabilities, indicating a short-term balance-sheet cushion.
Current assets often include cash, receivables and inventory, while current liabilities include trade payables and debt due soon. The ratio brings those amounts together at a reporting date. It can improve because assets rise, liabilities fall or long-term borrowing replaces short-term borrowing. Each explanation has different implications, and a single reporting-date ratio may conceal large swings during the year.
Suppose a company has J$30 million of current assets and J$20 million of current liabilities. Its current ratio is 1.5: one dollar of those liabilities is covered by J$1.50 of recorded current assets. If J$18 million of the assets is slow-moving stock, the company could still struggle to pay a J$5 million bill tomorrow despite that apparently comfortable ratio.
FosRich seeks time from bondholders as restructuring talks continue