Professional Documents
Culture Documents
Investors in
the Share Market
Websites:
www.ato.gov.au
www.asx.com.au
Liquidity
• The ability of a company to meet its short-term
financial obligations
• Measured by current ratio
– Fails to consider the not very liquid nature of certain
current assets like inventory
Liquidity (cont.)
• Measured by liquid ratio
• The higher the current and liquid ratios, the better
the liquidity position of a firm
Interest cover earnings before finance lease charges, interest and tax
finance lease charges and interest
(6.4)
EBIT
total funds employed (shareholders' funds and borrowings)
(6.5)
EBIT
long- term funds (i.e. total funds less short - term debt)
(6.6)
D t
P t1 t
1rs
0
D
P
0
0
rs
(6.9)
1g
P D
0 0
r g
s
(6.12)