Q4. List of liquidity ratios
What are the key financial ratios to analyze the liquidity of an entity?
A4.
Liquidity ratios are calculated as follows:
(1) Current ratio
= Current assets / Current liabilities
(2) Quick ratio
= Quick assets / Current liabilities
= (Cash + Marketable securities + Accounts receivable) / Current liabilities
(3) Working capital ratio
= Working capital / Total assets
= (Current assets – Current liabilities) / Total assets
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