1.Identify each of the liquidity ratios and list the elements of each?

2.Explain what liquidity is and what liquidity ratios tell a business owner?

3.Identify each of the leverage ratios and list the elements of each?

4.Explain what leverage is and what leverage ratios tell a business owner?

5.How should these be incorporated into the daily operations, or should it?

Exercises/Problems

1.If the current ratio increases from 0.9 to 1.5 from 2017 to 2018, does the bill paying ability of the business increase or decrease?

2.If the quick ratio decreases from 0.9 to 0.6 from 2017 to 2018, does the bill paying ability of the business increase or decrease?

3.If current assets are $19,290 and current liabilities are $16,005, calculate the current ratio.

4.If current assets are $19,290, current liabilities are $16,005, and inventory is $3,945, calculate the quick ratio.

5.For each of the following scenarios, indicate whether the leverage ratios are likely to be acceptable to the lender evaluating a loan request from a company.

Leverage Ratios	Acceptable Ratio to a Lender?
Interest Coverage Ratio = 3.4
Interest Coverage Ratio = .60
Interest Coverage Ratio = 1.77
Fixed Payment Coverage Ratio = 1.3
Fixed Payment Coverage Ratio = 5.4
Fixed Payment Coverage Ratio = .90
Interest Coverage Ratio = 3.4 and Fixed Payment Coverage = .87
Fixed Payment Coverage Ratio = 2.01 and Interest Coverage Ratio = 4.3
Interest Coverage Ratio = 1.50 and Fixed Payment Coverage Ratio = .45
Interest Coverage Ratio = 1.99 and Fixed Payment Coverage Ratio = 2.21