Liquidity

Tags

finance

Measures the short term mobility of the company to pay its measuring obligations and
meet its shortterm needs for cash.

After analysing the different ratios, we produce a [see page 6, liquidity analysis] to determine how profitable an investment in the company could be.

Liquidity Ratio

Is often defined using [see page 3, current ratio].

\[ Current Ratio = \frac{Current Assets}{Current Liabilities} \]

A current ratio of 1.76 means for every £1 of liability, the company has £1.76 of current assets.

Too high a current ratio indicates inefficiency. Cash should be invested in generating profits.