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Accounting Liquidity Measures

Accounting Liquidity Measures - over time and between...

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Liquidity measures: Working capital: A measure of a company’s ability to meet obligations. (It can be misleading because of how large or small the quantities being compared may be.) Current ratio: A better measure of liquidity. It judges a firm’s current bill-paying ability. This evaluation is more comparable
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Unformatted text preview: over time and between firms. (A ratio of 2.0 signifies adequate liquidity.) • Acid-test ratio: Gives a conservative, short-term assessment of the firm’s bill-paying ability. Merchandise inventories are excluded from the computation. (A ratio of 1.0 signifies adequate liquidity.)...
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