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A liquidity ratio is a type of financial ratio used to determine a company’s ability to pay its short-term debt obligations. The metric helps determine if a company can use its current, or liquid, assets to cover its current liabilities. Three liquidity ratios are commonly used – the current ratio, quick ratio, and cash ratio.
Apr 18, 2024 · While dependent on the specific industry, the quick ratio should generally exceed >1.0x. Quick Ratio = (Cash & Equivalents + Marketable Securities + Accounts Receivable) ÷ Current Liabilities. 3. Cash Ratio Formula. Of the ratios listed thus far, the cash ratio is the most conservative measure of liquidity.
Aug 16, 2024 · Its current ratio was: $134.836 billion / $125.481 billion = 1.075. If all current liabilities of Apple had been immediately due at the end of 2021, the company could have paid all of its bills ...
- Jason Fernando
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Oct 9, 2022 · Liquidity ratio analysis & interpretation. By calculating the various liquidity ratios as in the example above, the cash situation of the company can be analysed. The current ratio in the example is 250%. This means that the company has more current assets available than it has short-term liabilities to service - a positive sign.
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May 31, 2023 · The current liquidity ratio reflects the company’s ability to cover its short-term obligations by comparing the total current assets to the total current liabilities from a firm’s Balance Sheet. Current~ratio=\frac {Total~current~assets} {Total~current~liabilities} C urrent ratio = T otal current liabilitiesT otal current assets.
Apr 4, 2023 · 2. Liquid Ratio: The liquid ratio, also known as the acid-test or quick ratio is a more stringent measure of a company’s liquidity position. This ratio measures a company’s ability to pay off its short-term obligations with its most liquid assets, such as cash and marketable securities, excluding inventory and prepaid expenses.
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Liquidity ratios are accounting metrics used to determine a debtor’s ability to pay off short-term debt without raising external capital. The use of these metrics helps evaluate whether a firm can cover its current liabilities with its current assets. The three most common types of these metrics include the current ratio, the quick ratio, and ...
