What are the different types of liquidity and working capital ratios

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Answer-

The different types of liquidity and working capital ratios are

Current ratio = Current Assets / Current liabilities

This ratio gives the idea of the ability of the firm to meet all short term obligations of the firm. The ideal ratio should be 1:1. The higher the ratio the better the company is in a position to meet liquidity demands.

The other liquidity ratios that are much more stringent measures of liquidity measure of a company are

Quick ratio = ( Current assets - inventory ) / Current liabilities

Cash ratio = ( Cash + short term marketable securities) / Current liabilities

jeff jeffy answered 2 years ago

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