Liquidity ratios
Liquidity ratios are two ratios, current ratio and acid test ratio, which measure a company’s ability to pay off short-term debts. A liquidity ratio refers to one of the two ratios.
Definitions
According to College Accounting: A Practical Approach by Slater (13th edition),
- Liquidity ratios. The two ratios -- current ratio and acid test ratio -— which measure a company’s ability to pay off short-term debts.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Liquidity ratios. Ratios that show the relationship of a firm's cash and other current assets to its current liabilities.
According to the Strategic Management by David and David (15th edition),
- Liquidity ratios. The current ratio and quick ratio measure a firm's ability to meet short-term cash obligations.
Related concepts
- Accounting (alternatively known as accountancy) is management of financial data, information, and knowledge about financial transactions of legal entities. Accountancy tends to include bookkeeping and, depending on a particilar enterprise, may also include quatitative analysis of financial data in the bookkeeping system and/or business intelligence.
