# What Does Current Ratio Mean?

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What Does Current Ratio Mean? A liquidity ratio that measures a company's ability to pay short-term obligations. The Current Ratio formula is: What Does Quick Ratio Mean? An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company. The quick ratio is calculated as: What Does Receivables Turnover Ratio Mean? An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. Formula: Asset Turnover What Does Asset Turnover Mean? The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales in dollars by assets in dollars. Formula: Also known as the Asset Turnover Ratio. The debt ratio compares a company's total debt to its total assets, which is used to gain a general idea as to the amount of leverage being used by a company. A low percentage means that the company is less dependent on leverage, i.e., money borrowed from and/or owed to others. The lower the percentage, the less leverage a company is using and the stronger its equity position. In general, the higher the ratio, the more risk that company is considered to have taken on. Formula: | Components: | What Does Fixed-Charge Coverage Ratio Mean? A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated as the following: Investopedia explains Fixed-Charge Coverage Ratio For example, since leases are a fixed charge, the calculation determining a company's ability leases would be (EBIT + Lease Expenses) / (Lease Expenses + Interest). Gross