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Liquidity ratio represents one's ability to pay its current obligations or short-term debts within a period less than one year. Liquidity ratios, therefore, measures a company's liquidity position.
Liquidity ratios assess a firm's ability to pay short-term debts as they fall due.
Liquidity ratio only measures ability to pay short term obligations at a particular point in time. This ratio or any other ratios that are derived from the Balance Sheet is good at that particular point. Nonetheless it does give some indications of the ability to meet short term obligations.
It is therefore wise to look at trends as well as understand the prevailing economic climate at which those trends occur before deciding on an entity's ability to meet its short term obligations.
Liquidity ratios indicate how easily a company can meet its short term debt obligations. It is the ratio of current assets to current liabilities. Liquidity ratios give the investors an idea of how successfully a company can continue its day to day operations while meeting its short term debt obligations.
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Liquidity ratios are useful for management as well as bankers to keep a check the company's liquidity while bankers use it to see if their finances are within the set parameters.
Liquidity ratios is to measure the ability of the company to meet its short term debt and shot term liabilities when they fall due.
Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt obligations. These ratios measure the ability of a company to pay off its short-term liabilities when they fall due.
Liquidity ratios simply show the strength of a company in settling its short term obligations
Liquidity ratios show whether a business has sufficient cash or cash equivalent current assets to pay its debts as they come due.
It helps business to identify their liquidity position and take further action to avoid trouble likely to get from their creditors and banks. It also helps business to measure their efficiency on what extent they were able to convert inventory & receivables into cash and their decision on high and low ratios.