Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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can you help me understand the liquidity ratio?
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Step 1
INTRODUCTION
It is a ratio which the capability of a company to pay off its debts as and when they become due. We can say that this ratio shows that how fast a company can convert its current assets into cash so that it can pay off its debts on time.
The higher ratio means that the business has the ability to meet its current obligations. A good liquidity ratio is considered to be greater than 1. This ratio is generally used by creditors and lenders for providing credit.
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