Liquidity ratio
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Liquidity ratio may refer to:
- Reserve requirement, a bank regulation that sets the minimum reserves each bank must hold.
- Quick ratio (also known as an acid test) or current ratio, accounting ratios used to determine the liquidity of a business entity
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.
The formula is the following:
LR = liquid assets / short-term liabilities
Liquidity ratios measure how quickly assets can be turned into cash in order to pay the company's short-term obligations. Following ratios can be considered to measure the liquidity of a firm.
- Working Capital
- Working Capital Ratio
- Current Ratio
- Quick Ratio
- Absolute Liquid Ratio
See also[edit]
This disambiguation page lists articles associated with the title Liquidity ratio.
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