FINANCIAL RATIOS

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FINANCIAL RATIOS


This financial ratio is also known as ‘working capital ratio’ or ‘liquidity ratio’. It is extremely essential for a fir to be able to meet its obligations as they become due. Liquidity ratios measure the ability of the firm to meet its current obligations.


These ratios measure the company’s ability to meet the short term obligations as and when they become due. These ratios shows short term financial solvency of the concern.


In this type we calculate three ratios. They are as under:
1. Current Ratio

2. Quick Ratio

3. Cash Ratio
 
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