Liquidity Ratios
Liquidity ratios measure the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. Short-term creditors such as bankers and suppliers are particularly interested in assessing liquidity.
Liquidity ratios are used as indicators of a firm’s ability to meet its short-term obligations.These obligations include any current liabilities, including currently maturing long term debt. Current assets move through a normal cash cycle of inventories-sales-accounts receivable cash. The firm then uses cash to pay off or reduce its current liabilities. The best known liquidity ratio is the current ratio; current assets divided by current liabilities.
Category: Management & Organization Studies
Previous: ← Benchmarking
Next: Leverage Ratio →
More from this Section
- Performing stage
The fourth stage of group development is performing. The group structure is in place and ... - Powerful Buyers
Customers likewise can force down prices,demand higher quality or more service,and play ... - Organization change
Organization change which is any alteration of people, structure, or technology in an ... - Invention
The creation of new products or processes through the development of new knowledge or ... - Product –team structure
Assigns functional managers and specialists to a new product, project, or process team ...