Formal
A statistical measure of a company’s ability to pay its bills as they fall due. The availability of cash and other ‘liquid’ assets to pay creditors on time.
It includes:
- Current Assets / Liabilities %
- Quick Ratio
- Acid tests
Real-world Example
A company has $600k in current assets and $400k in current liabilities - a liquidity ratio of 1.5, indicating it has enough short-term resources to cover what it owes in the near term.
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