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Liquidity Ratio Analysis

Liquidity ratios are most useful when they are used in comparative form. Some of the most commonly used liquidity ratios - Current Ratio, Quick Ratio and Net Working Capital Ratio. Select a ratio calculator and key in the required values to get the desired result:

    



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  1. Current Ratio Calculator
    Current ratio is used to measure a company's ability to pay off its short-term liabilities with its current assets. Try now…

    How to calculate?
    Formula: Current Ratio = Current Assets/Current Liabilities.
    This is a balance sheet component; the values are commonly stated against current assets and current liabilities.

    Current Assets:
    This is a balance sheet component - cash, cash equivalents, account receivables, merchandise inventory and marketable securities can easily be converted into cash in the short term.

    Current Liabilities:
    This is a balance sheet component - accounts payable, tax payable (sales, payroll and other taxes) that are due in short-term.

    Example:
    Current ratio for a company with a total current assets of $200,000 and current liabilities of $155,000 is 1.29 : 1. It means $1.29 of current assets are available to cover each $1 of its current liabilities.
  2. Quick Ratio Calculator
    Quick ratio is used to identify how much liquid cash is readily available with a company to meet its current liabilities. Try now…

    How to calculate?
    Formula: Quick Ratio = Quick Assets/Current Liabilities
    This is a balance sheet component; the values are commonly stated against current assets and current liabilities.
    Note:
    Quick Assets = total current assets value - total inventory and any current prepaid assets value.

    Quick Assets:
    Quick assets are current assets that can be converted to cash in short-term. Simply subtract inventory and any current prepaid assets from the current asset total.

    Current Assets:
    This is a balance sheet component - cash, cash equivalents, account receivables, merchandise inventory and marketable securities can easily be converted into cash in the short term.

    Inventory:
    Inventory is the finished goods that can be sold immediately.

    Current Liabilities:
    This is a balance sheet component - accounts payable, tax payable (sales, payroll and other taxes) that are due in short-term.

    Example:
    Quick ratio for a company with a total current assets of $240,000, merchandise inventory of $40,000 and current liabilities of $105,000 is 1.9 : 1. It means $1.9 of quick assets available to cover each $1 of short-term debt (current liabilities).
  3. Net Working Capital Ratio Calculator
    Net working capital ratio is used to track the proportion of short term net funds to assets, usually on a trend line. Try now…

    How to calculate?
    Formula: Net Working Capital Ratio = Net Working Capital/Total Assets
    This is a Balance Sheet component; the values are commonly stated against Current Assets, Current Liabilities and Total Assets.
    Note:
    Net Working Capital = total current assets - total current liabilities.
    It is a liquidity calculation that measures a company’s ability to pay off its current liabilities with current assets.

    Current Assets:
    This is a balance sheet component - cash, cash equivalents, account receivables, merchandise inventory and marketable securities can easily be converted into cash in the short term.

    Current Liabilities:
    This is a balance sheet component - accounts payable, tax payable (sales, payroll and other taxes) that are due in short-term.

    Total Assets:
    Total assets are the sum of all current and noncurrent assets that a company owns.

    Example:
    Net working capital ratio for a company with a total current assets of $180,000 , current liabilities of $85,000 and total assets of $220,000 is 0.43 : 1. It means 43% of totals assets are in the form of short-term assets (Net working capital – liquid funds).

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