Liquidity ratios Flashcards
1
Q
Liquidity ratios
A
Measures of a firm’s ability to meet short-term debt obligations
- help to assess a firm’s liquidity / financial solvency from information of the balance sheet / statement of financial positions
2
Q
Current ratio
A
Current assets / current liabilities
3
Q
Quick ratio
A
(Cash+ shortterm investments + accounts receivables) / current liabilities
4
Q
Cash ratio
A
Cash / Current liabilities
5
Q
Difference quick ratio and current ratio
A
Current ratio includes inventories and therefore quick ratio is a more conservative measure which only includes assets that are easily converted into cash within a year
