Liquid ratio is also known as (2024)

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Liquid ratio is also known as? ›

Quick ratio and acid test ratio are other names for liquid ratio.

There are following types of liquidity ratios: Current Ratio or Working Capital Ratio. Quick Ratio also known as Acid Test Ratio. Cash Ratio also known Cash Asset Ratio or Absolute Liquidity Ratio.

The Liquid Ratio, also known as the quick or acid test ratio, is the ratio between Liquid Assets and Current Liabilities. Liquid Assets are a part of Current Assets, and it includes only those items that a company can convert into cash within 90 days or less.

A liquidity ratio is used to determine a company's ability to pay its short-term debt obligations. The three main liquidity ratios are the current ratio, quick ratio, and cash ratio. When analyzing a company, investors and creditors want to see a company with liquidity ratios above 1.0.

The current ratio is also referred to as the working capital ratio. This ratio compares a company's current assets to its current liabilities, testing whether it sustainably balances assets, financing, and liabilities.

Liquidity ratios are an important class of financial metrics used to determine a debtor's ability to pay off current debt obligations without raising external capital.

The cash ratio, also known as the cash-asset ratio, is a measure of liquidity or a company's ability to meet short-term debts.

The Quick Ratio, also known as the Acid-test or Liquidity ratio, measures the ability of a business to pay its short-term liabilities by having assets that are readily convertible into cash.

Generally, 1:1 is treated as an ideal ratio.

What is the liquidity ratio quizlet? ›

Liquidity ratios are employed by analyst to determine the firm's ability to pay its short-term liabilities. The current ratio is the best-known measure of liquidity. The most conservative liquidity measure is the cash ratio.

A good current ratio is between 1.2 to 2, which means that the business has 2 times more current assets than liabilities to covers its debts.

It is calculated by dividing the total current assets by total current liabilities. The quick ratio, also known as the acid ratio, determines the ability of the company to pay off its short-term liabilities with the most liquid assets, meaning that inventory is excluded.

Generally speaking, a good quick ratio is anything above 1 or 1:1. A ratio of 1:1 would mean the company has the same amount of liquid assets as current liabilities. A higher ratio indicates the company could pay off current liabilities several times over.

Cash is the most liquid of assets, while tangible items are less liquid. The two main types of liquidity are market liquidity and accounting liquidity. Current, quick, and cash ratios are most commonly used to measure liquidity.

The Acid-Test Ratio, also known as the quick ratio, is a liquidity ratio that measures how sufficient a company's short-term assets are to cover its current liabilities.

Solvency ratios are also known as leverage ratios. It is believed that if a company has a low solvency ratio, it is more at the risk of not being able to fulfil its debt obligation and is likely to default in debt repayment.

For this reason, the activity ratio is also known as the efficiency ratio or the more popular turnover ratio. The role of activity ratio or turnover ratio is in the evaluation of the efficiency of a business by careful analysis of the inventories, fixed assets and accounts receivables.

Price/earnings-to-growth ratio

The price/earnings-to-growth, or PEG, ratio tells a more complete story than P/E alone because it takes growth into account.