Sign in. Career Development. What are liquidity ratios? Types of liquidity ratios. Quick ratio. Current ratio. Times interest earned ratio. Days sales outstanding DSO ratio.
Liquidity ratios vs. The difference in purpose: You can differentiate between liquidity and solvency ratios by looking at their purposes.
Liquidity ratios are used to measure a company's ability to pay off current liabilities, whereas solvency ratios are used to measure a company's ability to pay off long term liabilities and company operations. To generate profit, a business must bring in more than enough revenue to cover its fixed and variable costs. High liquidity means that you have a relatively strong cash and current accounts position, which means that you can easily cover short-term debt obligations.
Low liquidity means you have limited capacity to cover your short-term debts with existing cash and current assets. Being in this position makes you less appealing for new loans and restricts your ability to invest in growth. One of the conventional liquidity ratios is called the current ratio. This ratio compares your current assets to your current liabilities.
In essence, it shows your ability to cover short-term debt if you need to in a pinch. Current assets include cash and accounts that you can easily convert into cash. Cash Ratio Cash ratio also called cash asset ratio isthe ratio of a company's cash and cash equivalent assets to its total liabilities. Current Ratio Current ratio is balance-sheet financial performance measure of company liquidity.
Quick Ratio The quick ratio is a measure of a company's ability to meet its short-term obligations using its most liquid assets near cash or quick assets. Working Capital Working capital is the amount by which the value of a company's current assets exceeds its current liabilities. Working Capital Ratio Working capital ratio is the alternative term for the term "current ratio".
Start free Ready Ratios financial analysis now! Login to Ready Ratios. If you have a Facebook or Twitter account, you can use it to log in to ReadyRatios:. Enter your login:. Enter your password:. Stay signed in. Login As. Use your Facebook. Use your Twitter. Learn more about how you can improve payment processing at your business today. Learn more Sign Up. Experts answer businesses questions on what's next for the future of payments. Contact sales. Skip to content Open site navigation sidebar.
Why GoCardless? For use case Subscription payments Recurring payments built for subscriptions Invoice payments Collect and reconcile invoice payments automatically. Our customers Customer stories Hear from our customers Customer success Our customer first approach Customer Hub Training resources, documentation, and more. For small business Overview Improve your cashflow Keep track of payments Reduce costs Reduce failed payments Increase conversions.
0コメント