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How do you calculate liquidity ratio?

The ratio used to measure the ability of a company to pay its short-term liabilities with the short-term assets is called as the current or liquidity ratio. It is calculated by dividing the current assets with the current liabilities.

What does liquidity ratio measure?

Liquidity Ratios. Liquidity ratios are financial ratios which measure a company’s ability to pay off its short-term financial obligations i.e. current liabilities using its current assets. Most common liquidity ratios are current ratio, quick ratio, cash ratio and cash conversion cycle.

What are some liquidity ratios?

Most common examples of liquidity ratios include current ratio, acid test ratio (also known as quick ratio), cash ratio and working capital ratio.

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