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Liquidity Ratio: The Water of Accounting Ratios

swati11 on Finance

https://blog.finology.in - Liquidity ratio is one of the most important factors to be kept in mind before investing in a company. It is a crucial accounting instrument that is used to infer the current debt repaying capacity or proficiency of a borrower.

In simple words, it could be defined as the Ratio that indicates whether an individual or business can pay off the short term dues without any outer financial assistance. Considering the liquid assets of the respective company, present financial duties of it are analyzed to substantiate the safety limit of a company.

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