3. WHAT IS LIQUIDITY?
-Refers to how quickly and easily you can
turn something you own into cash without
losing its value.
4. • Net working capital
-Working capital is a financial metric which
represents operating liquidity available to a
business, organisation, or other entity,
including governmental entities.
Formula: Working Capital = Current Assets –
Current Liabilities
5. • Current Ratio
-The current ratio is a liquidity ratio that
measures whether a firm has enough
resources to meet its short-term obligations.
Formula: Current ratio= Current Asset ÷
Current liabilities
6. • Quick Ratio
-Also known as the acid-test ratio is a type of
liquidity ratio, which measures the ability of
a company to use its near cash or quick
assets to extinguish or retire its current
liabilities immediately.
Formula: Quick Ratio= Current Assets –
Inventory ÷ Current Liabilities
7. • Cash Ratio
-Is a measure that tells you how much cash a
company has compared to its short-term
debts or obligations. It shows if a company
has enough cash on hand to quickly pay its
bills or debts that are due soon.
Formula: Cash Ratio= Cash ÷ Current
Liabilities
