);

Liquidity Ratio (Standard)

The Liquidity Ratio gives a relative measure of liabilities compared to assets. Generally, you would be looking for a figure greater than 1, for instance a company has at least enough assets to cover its liabilities. However, it is very important to also understand how liquid these assets are. For instance, if all of the creditors demanded payment at the same time, how much could realistically be raised in enough time to pay them? Would this cover the liabilities? Overcoming this can be achieved by using a Quick Ratio (see below). Please also note that some industries traditionally trade on very low or high measures.