Purpose & Importance of Financial Ratio: Ratios help in analyzing the performance trends over a long period of time. They also help a business to compare the financial results to those of competitors. Ratios assist the management in decision-making. They also point out the problem and weak areas along with the strength areas. Ratios to […]
A liquidity ratio is a type of financial ratio used to determine a company’s ability to pay its short-term debt obligations. The metric helps determine if a company can use its current, or liquid, assets to cover its current liabilities. 1. Current Ratio: Current Ratio = Current Assets / Current Liabilities The current ratio is the […]
Importance of Liquidity ratios: Liquidity Ratio is a metric that one uses to examine the financial status of a business to pay off its debts. It is the estimation of the measure of a business’s capability to pay off its current liabilities. This is because liquidity is all about the daily income and expenses of […]
What are financial ratios: Financial ratios are relationships determined from a company’s financial information and used for comparison purposes. We can also define them as they are the mathematical comparisons of financial statement accounts or categories. These relationships between the financial statement accounts help investors, creditors, and internal company management understand how well a business […]
