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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 is the financial ratio used to assess a company liquidity?

The most basic of the liquidity ratios is the current ratio, also called the working capital ratio. The current ratio equals a company's current assets divided by its current liabilities.

Is there a downside to having a high liquidity ratio?

In a business, too much liquidity may indicate you are spending too little on research and development . If you do not create new revenue streams and your existing revenue declines due to normal demand curves and product life cycles, you will likely lose market share .

How do you calculate assets to liabilities ratio?

To calculate the debt to assets ratio, divide total liabilities by total assets. The formula is: Total liabilities ÷ Total assets A variation on the formula is to subtract intangible assets (such as goodwill) from the denominator, to focus on the tangible assets that were more likely acquired with debt. For example,...


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