The current ratio measures a company's ability to pay its debts that are due within a years time.
Current Ratio = Current Assets/Current Liabilities
Why is it important?
A current ratio that is in line with an industry average or higher indicates that a company is able to pay its short term debts without risk of default. As for a current ratio below industry average, may indicate that a company is at risk of defaulting on its short term debts, thus making it a higher risk stock.