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Liquidity Ratio
Helps You Identify If
- Your Business Has A Susceptibility To Cash Shortfalls
- Your Short Term Debt Is Unmanageable
- Your Inventory Levels Are Too High
Liquidity Ratio Video
Play Video about Liquidity Ratio Graphic
What Is Liquidity Ratio?
What Does It Mean?
How Is It Calculated?
How Can I Improve My Liquidity Ratio?
A business Liquidity Ratio is a means of understanding a company’s susceptibility to either current of future financial distress. It also helps build a risk profile of the business. But remember though that a single “safe” liquidity measure does not exist across all industries. Some industries traditionally and successfully trade at low liquidity levels, whereas for others, the same figure is a sign of distress.
How do you get your Liquidity Ratio? The Liquidity Ratio gives a relative measure of current liabilities compared to current assets. Strive for a figure greater than 1.5. This means that your accessible assets can easily offset your immediate liabilities.
