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Liquidity ratio may refer to:
- Reserve requirement, a bank regulation that sets the minimum reserves each bank must hold.
- Quick ratio (also known as an acid test or liquidity ratio), a ratio used to determine the liquidity of a business entity
Liquidity ratio expresses a company's ability to repay short-term creditors out of its total cash. It is the result of dividing the total cash by short-term borrowings. It shows the number of times short-term liabilities are covered by cash. If the value is greater than 1.00, it means fully covered.
The formula is the following:
LR = liquid assets / short-term liabilities
Video Liquidity ratio
See also
- Accounting liquidity
- Market liquidity
Source of article : Wikipedia
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