A company is technically bankrupt when its current liabilities (the ones that have to be paid within the next 12 months) are greater than its current assets (the ones that will turn into cash within the next 12 months). The current ratio, which measures a company's ability to meet its short-term debt obligations, comes straight from the balance sheet. You calculate it by dividing your current assets by your current liabilities. If the ratio is 1.25 or higher, you are in fairly good shape. If it's less than 1.00, you could be headed for trouble.