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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