Explanation

All liquidity ratios measure a firm's ability to cover short-term obligations by dividing current assets by current liabilities (CL).

Types of liquidity ratios

Current Ratio = Current Assets / Current Liabilities.

Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities.

Cash Ratio = (Cash + Marketable Securities) / Current Liabilities.

Net Working Capital = Current Assets – Current Liabilities.

ND5-09-2023