A financial health indicator that measures the ability of a company to pay immediate its creditor demands using its most liquid assets (cash or assets that are easily converted into cash). This ratio is calculated by adding cash, accounts receivable and marketable securities and then dividing this sum by total current liabilities. Ideally the resulting ratio should be greater than 1.25 to demonstrate that the company has the ability to pay for its bills. Classified as a liquidity ratio.
