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Liquidity Ratios

Liquidity Ratios

Liquidity ratios indicates the company’s ability to meet its short term obligations using its current assets. These ratios help in understanding the liquidity position of the company.

Below are the important liquidity ratios we will learn as part of this resources.

Click on each ratios to learn their meaning, formula along with examples, interpretation and real life application

  • Current ratio

    If the ratio is more than 1, It indicates that current assets are sufficient to pay off current liabilities…

  • Quick ratio

    If the ratio is more than 1, It indicates that current liabilities can be paid by quick assets without..

  • Cash ratio

    If the ratio is more than 1, it indicates that cash and short term securities are sufficient to payoff…

  • Defensive Interval ratio

    The ratio indicates how many days a company can operate without needing to tap into other capital sources…

  • Cash conversion cycle

    Higher the cash conversion cycle, significant part of cash is blocked in Debtors and inventory. This indicates…