Liquidity Ratio
The Liquidity Ratio is a financial metric used to assess a company’s ability to meet its short-term debt obligations without relying on external financing. It measures the company’s liquidity, or its capacity to convert assets into cash quickly to cover liabilities. A higher liquidity ratio indicates a stronger ability to pay off short-term debts, ensuring the company can operate smoothly without facing liquidity issues. Common liquidity ratios include the current ratio and quick ratio, which help investors and analysts evaluate the company’s financial health and risk.
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