This is the company's debt due within 12 months. This is the company's accounts receivable, cash, marketable securities and inventory - items that could be used to pay off current liabilities in a pinch. Dividing current assets by current liabilities gives you a company's current ratio. You want this to be higher than 1, and preferably much higher. For a more conservative number, called the quick ratio, subtract inventory from current assets.
Inventory can be tough to sell in a downturn.
You also should get an idea of the company's total debt vs. its total assets. In general, the less debt the better. It depends on the industry, Tillinghast says. Financial companies can support debt levels that would be terrifying to industrial companies. For that, look at earnings per share.