CMA USA | P2 | A2.01 | Liquidity Ratio's | Theory скачать в хорошем качестве

CMA USA | P2 | A2.01 | Liquidity Ratio's | Theory

1. Current Ratio The current ratio measures a company's overall liquidity and its ability to pay off short-term liabilities using all its current assets, including inventory, cash, and receivables. A higher ratio is generally favorable, as it indicates the company has enough resources to manage its short-term obligations. However, an excessively high ratio might suggest inefficient use of assets or overstocking inventory. 2. Quick Ratio (Acid-Test Ratio) The quick ratio is a stricter measure of liquidity than the current ratio, focusing only on highly liquid assets like cash, marketable securities, and receivables. It excludes inventory, as inventory may not be quickly converted to cash. A quick ratio above 1 is ideal, signaling that the company can meet immediate obligations without depending on inventory sales. This is particularly important for industries where inventory turnover is slow. 3. Cash Ratio The cash ratio is the most conservative liquidity measure, assessing whether a company can settle its short-term liabilities using only cash and cash-equivalent assets. It’s a useful indicator during times of financial stress or economic downturns when liquidity is critical. While a high cash ratio indicates strong liquidity, it might also suggest underutilized cash reserves that could be invested for growth. 4. Cash Flow Ratio This ratio shows how well a company can cover its short-term liabilities using the cash flow generated from its core business operations. It’s particularly useful because it focuses on actual cash availability, rather than relying on accounting values that might include non-cash items. A higher cash flow ratio indicates strong operational efficiency and liquidity management. 5. Net Working Capital Ratio This ratio compares a company’s working capital (current assets minus current liabilities) to its total assets. It highlights how much of the company’s assets are financed by short-term liquidity. Positive working capital typically reflects good liquidity and operational health, while negative working capital could indicate challenges in meeting obligations or overreliance on short-term financing.