FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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What do the Liquidity ratios show?

Expert Solution
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Step 1

Ratio analysis: The analysis of a company using the financial ratios and comparing its trends and measure its performance within the company and the companies of the industry is known as ratio analysis. The main categories of ratio analyses are liquidity ratios, profitability ratios, activity ratios, and leverage ratios.

Step 2

Liquidity ratios: Liquidity ratios measure the short-term capacity of a company to pay its maturing obligations and to meet unexpected requirements for cash. Liquidity ratios are current ratio, working capital ratio, acid test ratio and so on.

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