Merch Strategies: Radios

Question 1

Liquidity Ratios

Answer 1

def: shows the ability of a business to meet cash demands as they arise

1. Current Ratio
   Measures sovereignty (a businesses ability to pay debt)

Formula: current assets/ current liabilities

2. Quick or Acid Test Ratio
   the exact same as current ratio but includes inventories

Formula: current assets - inventories/ current liabilities

Question 2

Current Ratio

Answer 2

• a liquidity ratio

Measure soverency (the ability to pay debt)

Formula: Current assets/ current liabilities

Question 3

Quick or Acid Test Ratio

Answer 3

• liquidity ratio

the exact same as “current ratio” but it just includes inventories.

Formula: current assets - inventories/ current liabilities