What are the key financial ratios to analyze the liquidity of an entity?



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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