Liquidity ratios, Financial Accounting

Liquidity Ratios - These ratios include the Current Ratio and the Quick Ratio or the acid test ratio. Liquidity ratios show the Liquid position of a company in the short term i.e. the capability of a firm to pay its obligations in the short term.

Ø  Current Ratio = Current Assets / Current Liabilities

Ø  Quick Ratio = (Current Assets - Inventory) / Current Liabilities

Defensive Interval ratio is also a type of efficiency ratio for liquidity which is calculated as below -

Defensive Interval Ratio = Current Assets / Daily operational expenses.

The above ratio indicates the ability of a company to operate without the long term assets or it can be said that how many days a company can operate only through the presence of current assets.

 

 

Posted Date: 7/26/2012 5:53:47 AM | Location : United States







Related Discussions:- Liquidity ratios, Assignment Help, Ask Question on Liquidity ratios, Get Answer, Expert's Help, Liquidity ratios Discussions

Write discussion on Liquidity ratios
Your posts are moderated
Related Questions
Significant Findings or Issues - Substantive matters which are vital to procedures performed, conclusions reached or evidence obtained and include though aren't limited to: 1.

How should I handle Booking an invoice in one month for Raw material that has not been received until the following month?


You own a two-bond portfolio. Each has a par value of $1,000. Bond A matures in five years, has a coupon rate of 8 percent, and has an annual yield to maturity of 9.20 percent. Bon

SMALL BANKRUPTCIES The court may order the estate of a debtor to be administered summarily, if the debtor's assets are not likely to exceed Shs 12,000 in value.  This is known

State the term - Regulations Financial accounting reports, for numerous businesses, are subject to accounting regulations which try to make sure they are produced with standard

Suppose the interest rate for a one-period bond is 4% between the current period and the next. Then the rate becomes 5% for ever. (a) What is the price of an asset paying (1,1,1

The statement of comprehensive income for the year ended 31 December 2009 and its comparative is shown below: 2009 2008 $m

Sales volume reaches the maximum capacity of the new machine in Year 4. The positive NPV point to that the investment in Machine Two is financially acceptable althoug

Jane makes a living renting expensive state of the art surveillance equipment to detectives and nervous spouses. Her average rental period is 27 days. The rental price includes all