This document discusses liquidity ratio, which is a financial indicator that measures how prepared someone is to meet short-term obligations or emergency needs. Specifically: 1) Liquidity ratio is calculated as liquid assets divided by immediate monthly expenses. It indicates how many months of expenses can be supported without income. 2) Liquid assets include cash savings and some fixed deposits, but not investments like equities which can fluctuate. 3) A liquidity ratio of 2 means two months of expenses are covered by liquid assets. The appropriate ratio depends on individual factors like income stability and expenses. Monitoring liquidity ratio helps with financial preparedness.