Accounting

We answer your accounting questions.

Over 500 questions have been answered on our accounting blog. Click here to suggest a question.



July 31, 2008

What is a liquidity ratio?

A liquidity ratio is an indicator of whether a company’s current assets will be sufficient to meet the company’s obligations when they become due.

The liquidity ratios include the current ratio and the acid test or quick ratio. The current ratio and quick ratio are also referred to as solvency ratios. Working capital is an important indicator of liquidity or solvency, even though it is not technically a ratio.

Liquidity ratios sometimes include the accounts receivable turnover ratio and the inventory turnover ratio. These two ratios are also classified as activity ratios.

Learn more about Financial Ratios including the liquidity ratios.




Comments

11 Responses to “What is a liquidity ratio?”

  1. beso sanaia on August 6th, 2008 2:45 pm

    liquidity ratio= current assets/current liabilities

  2. rich k on August 11th, 2008 6:40 am

    your site is very exciting and i will inform my friends about it. thanks

  3. charyenz on October 13th, 2008 3:23 am

    wow i love this web,its good 4 me n i believe im nt the only one hey

  4. Mike on March 3rd, 2009 5:04 am

    You people are too much. Pls keep it up

  5. Kisan on March 5th, 2009 4:22 am

    Very useful website. I’ve learnt alot from this site

  6. Arif Hannan on March 10th, 2009 3:03 am

    kindly give me the detail about deffered gross profit regarding Installment Sales.

  7. vivek on March 11th, 2009 12:42 am

    i would like this site because very useful to learn about accounts i will share my friends also.,

  8. mangqezu on April 1st, 2009 7:58 am

    what is the main objective of using quick ratio, is it applicable to all businesses

  9. saima on April 16th, 2009 8:42 am

    very usefull wedsite,i have learned a lot from this site.keep it up.

    plz tell me Is solvency ratio n liqidify ratio is same or not?if not then tell me the differences

  10. amo on May 5th, 2009 3:58 am

    simple to understand useful

  11. Bernard on May 6th, 2009 6:16 am

    I learn from this site

Leave a Reply