Which ratio is a liquidity ratio quizlet?

The current ratio is a liquidity ratio that measures a company’s ability to pay short-term and long-term obligations.

Which are the liquidity ratios?

Common liquidity ratios include the quick ratio, current ratio, and days sales outstanding. Liquidity ratios determine a company’s ability to cover short-term obligations and cash flows, while solvency ratios are concerned with a longer-term ability to pay ongoing debts.

What is the most widely used liquidity ratio?

Current ratio
Liquidity ratios measure a company’s ability to meet current liabilities. The higher the liquidity ratio, the more likely the firm will be able to meet its short term obligations. Current ratio – It is the most widely used measure of liquidity.

What does a liquidity ratio measure quizlet?

Liquidity ratios measure the company’s ability to pay off short-term debt obligations. Used to measure the relative efficiency of a company based on the use of its assets, leverage, or other balance sheet items.

Which liquidity ratio is most important?

cash ratio
The cash ratio is the most conservative liquidity ratio of all. It only measures the ability of a firm’s cash, along with investments that are easily converted into cash, to pay its short-term obligations. Along with the quick ratio, a higher cash ratio generally means the company is in better financial shape.

What is standard liquid ratio?

Statutory Liquidity Ratio or SLR is a minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. The SLR is fixed by the RBI.

What are the 5 liquidity ratios?

Liquidity ratios

  • Current Ratio. The current ratio compares current assets to current liabilities.
  • Quick Ratio. The quick ratio is the same as the current ratio, but excludes inventory.
  • Cash Ratio. The cash ratio compares just cash and readily convertible investments to current liabilities.
  • Related Courses.

What are liquidity ratios discuss their significance?

Liquidity ratios are a measure of the ability of a company to pay off its short-term liabilities. Liquidity ratios determine how quickly a company can convert the assets and use them for meeting the dues that arise. The higher the ratio, the easier is the ability to clear the debts and avoid defaulting on payments.

What are the types of liquidity?

The two main types of liquidity include market liquidity and accounting liquidity. Current, quick, and cash ratios are most commonly used to measure liquidity.

Why is liquidity ratio important?

Liquidity ratios are important to investors and creditors to determine if a company can cover their short-term obligations, and to what degree. The higher the ratio is, the more likely a company is able to pay its short-term bills.