What are the various liquidity ratios?


What are the various liquidity ratios?

The three types of liquidity ratios are the current ratio, quick ratio and cash ratio.

What are the 5 liquidity ratios?

4 Common Liquidity Ratios in Accounting

  • Current Ratio. One of the few liquidity ratios is what’s known as the current ratio.
  • Acid-Test Ratio. The Acid-Test Ratio determines how capable a company is of paying off its short-term liabilities with assets easily convertible to cash.
  • Cash Ratio.
  • Operating Cash Flow Ratio.

What are liquidity ratios Class 12?

1. Liquidity Ratios Liquidity ratios measure the firm’s ability to fulfil its short-term financial obligations. (i) Current ratio/Working capital ratio This ratio establishes relationship between current assets and current liabilities and is used to assess the short-term financial position of the business concern.

What are the different types of ratios?

The various kinds of financial ratios available may be broadly grouped into the following six silos, based on the sets of data they provide:

  • Liquidity Ratios.
  • Solvency Ratios.
  • Profitability Ratios.
  • Efficiency Ratios.
  • Coverage Ratios.
  • Market Prospect Ratios.

What is standard liquid ratio?

A normal liquid ratio is considered to be 1:1.

What is liquidity ratio Wikipedia?

In accounting, the liquidity ratio expresses a company’s ability to repay short-term creditors out of its total cash. It is the result of dividing the total cash by short-term borrowings. It shows the number of times short-term liabilities are covered by cash. If the value is greater than 1.00, it means fully covered.

What are 2 types of ratios?

In general, a ratio is an expression that shows the relationship between two values. It tells us how much of one thing is there as compared to another. There are two “kinds” of ratios: “part to part” and “part to whole“.

Is cash a liquidity?

Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price. Cash is the most liquid of assets, while tangible items are less liquid. The two main types of liquidity include market liquidity and accounting liquidity.

What is meant by liquidity?

What do you mean by Liquidity? Liquidity is the degree to which a security can be quickly purchased or sold in the market at a price reflecting its current value. Liquidity in finance refers to the ease with which a security or an asset can be converted into cashat market price.

What is the standard liquid ratio?

A good current ratio is between 1.2 to 2, which means that the business has 2 times more current assets than liabilities to covers its debts. A current ratio below 1 means that the company doesn’t have enough liquid assets to cover its short-term liabilities.