1) Liquidity Measurement Ratios
1.1) Current Ratio
1.1.1) is a popular financial ratio used to test a company's liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities.
1.1.2) The concept is to ascertain whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes).
1.1.3) In theory, the higher the current ratio, the better.
| Current Ratio = | Current Assets |
| Current Liabilities |
1.2) Quick Ratio
1.2.1) aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that further refines the current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities.
1.2.2) is more conservative than the current ratio because it excludes inventory and other current assets, which are more difficult to turn into cash.
1.2.3) higher ratio means a more liquid current position.
| Quick Ratio = | (Cash & Equivalents + Short term Investments + Accounts Receivable) |
| Current Liabilities |
1.3) Cash Ratio
1.3.1) an indicator of a company's liquidity that further refines both the current ratio and the quick ratio by measuring the amount of cash, cash equivalents or invested funds there are in current assets to cover current liabilities.
| Cash Ratio = | (Cash + Cash Equivalents + Invested Funds) |
| Current Liabilities |
Source: http://www.fncalculator.com/financialcalculator?type=financialRatios#
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