How to Calculate Liquidity Ratios
What is Liquidity Ratios?
Liquidity ratios measure a company's ability to meet short-term obligations using current assets. The key ratios are the Current Ratio, Quick Ratio (Acid Test), and Cash Ratio. They are critical for assessing financial health and credit risk.
Formula
Step-by-Step Guide
- 1Current Ratio = Current Assets / Current Liabilities
- 2Quick Ratio = (Current Assets − Inventory) / Current Liabilities
- 3Cash Ratio = Cash & Equivalents / Current Liabilities
- 4Current ratio > 1 means more assets than short-term debts
Worked Examples
Frequently Asked Questions
What is Liquidity Ratios?
Liquidity ratios measure a company\. Use this calculator for accurate, instant results.
How accurate is the Liquidity Ratios calculator?
The calculator uses the standard published formula for liquidity ratios. Results are accurate to the precision of the inputs you provide. For financial, medical, or legal decisions, always verify with a qualified professional.
What units does the Liquidity Ratios calculator use?
Enter values in the units shown in each input field. The calculator displays results in standard units and shows the calculation steps.
What formula does the Liquidity Ratios calculator use?
The core formula is: Current Ratio = Current Assets / Current Liabilities. Each step in the calculation is shown so you can verify the result manually.
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