Ratios In Business Flashcards
1
Q
Current Ratio
A
Measures firm’s ability to cover short term liabilities with its short-term assets
Current assets / current liabilities
2
Q
Acid test ratio
A
More stringent, excludes inventory from current assets (can’t be easily converted to cash)
(Current Assets - Inventory) / Current Liabilities
3
Q
Gearing ratio
A
Compares the firm’s debt to its equity
(Debt/Equity)*100
