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Financial Intelligence, Revised Edition
book

Financial Intelligence, Revised Edition

by Karen Berman, Joe Knight, John Case
January 2013
Beginner content levelBeginner
272 pages
6h 32m
English
Harvard Business Review Press
Audiobook available
Content preview from Financial Intelligence, Revised Edition

23

Liquidity Ratios

Can We Pay Our Bills?

Liquidity ratios tell you about a company’s ability to meet all its financial obligations—not just debt but payroll, payments to vendors, taxes, and so on. These ratios are particularly important to small businesses—the ones that are in most danger of running out of cash—but they become important whenever a larger company encounters financial trouble as well. Not to harp on the airlines too much, but several of the larger carriers have been through bankruptcy in recent years. You can bet that professional investors and bondholders have been carefully watching their liquidity ratios ever since.

Again, we’ll limit ourselves to two of the most common ratios.

CURRENT RATIO

The current ratio measures a company’s ...

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Publisher Resources

ISBN: 9781422144121