Certified Valuation Analyst (CVA) Exam 2025 – 400 Free Practice Questions to Pass the Exam

The current ratio is a financial metric that assesses a company's ability to meet its short-term obligations with its short-term assets. It is calculated by dividing current assets by current liabilities. A current ratio greater than 1 suggests that a company has more current assets than current liabilities, which generally indicates good short-term financial health.

In this scenario, a current ratio of 1.9 indicates that for every dollar of current liabilities, the company has $1.90 in current assets. This level of coverage demonstrates a strong liquidity position and implies that the company is well-equipped to cover its short-term obligations.

While other potential ratios could indicate varying levels of liquidity (for example, ratios below or above 1), the specific value of 1.9 suggests a solid financial standing in terms of liquidity, making it a positive indicator for stakeholders assessing the company’s short-term financial viability.