Liquidity ratios are those which signifies whinier the company will be able to repay short term financial obligations as they arise. Here is the list of liquidity ratios
1. Current Ratio – Current Assets/Current Liabilities – Ideal ratio should be 2:1. It is also know as working capital ratio.
2. Liquid Ratio – Quick Assets/ Current Liabilities – Ideal ratio should be 1:1
3. Working Capital – Current Assets – Current Liabilities
4. Cash Debt Coverage – Cash flow from operations – dividends / total debt – Ideal ratio should be more than 1:1.
5. Absolute Liquid ratio – Absolute liquid assets (cash +bank + marketable securities)/Current Liabilities