The National Directory of Certified Public Accountants

Ask A CPA - Financial Statements

What Are The Liquidity Ratios As They Refer To Financial Statements ?

Financial statement ratios are generally separated into 4 categories: Liquidity, profitability, efficiency and market ratios. The liquidity ratios measure the cash available to cover current and long term expenses. The current ratio measures the ability to meet short term debt and consists of current assets divided by current liabilities. The quick (acid test) ratio is similar to the current ratio, but it excludes inventory.

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