How it Works
Liquid Assets / Current Liabilities. A ratio > 1.0 indicates solvency.
What is Liquidity Ratio Calculator?
Specifically calculates the 'Current Ratio' or 'Acid Test' depending on inputs, measuring if a company has enough liquid assets to pay debts due within a year.
Step-by-Step Guide
1. Liquid Assets
Cash + Receivables.
2. Liabilities
Due < 1yr.
3. Ratio
Divide.
Example
Input: $20k Assets, $10k Debt
Result: 2.0 Ratio
FAQ
Good ratio?
1.5 to 2.0 is healthy.
Too high?
Excess cash isn't being invested.
Conclusion
A ratio below 1.0 suggests imminent cash flow problems.