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A) Liquidity Ratios Liquidity Ratios are used to determine a company's ability to meet its short terms obligations. These include; 1) Current Ratio 2) Acid Test Ratio 3) Working capital Current Ratio What Does Current Ratio Mean? A liquidity ratio that measures a company's ability to pay short-term obligations. Also known as "liquidity ratio", "cash asset ratio" and "cash ratio". OR It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities.
D) Activity Ratios Activity ratios measure a firm's ability to convert different accounts within their balance sheets into cash or sales. These include: 1) Total Assets Turnover 2) Fixed Assets Turnover Total Assets Turnover What Does Asset Turnover Mean? The total asset turnover ratio measures the ability of a company to use its assets to generate sales. The total asset turnover ratio considers all assets including fixed assets, like plant and equipment, as well as inventory and accounts receivable. Formula = Net Sales / Total Assets This ratio answer in Times