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Liquidity ratios are very practical in nature. For instance, can a company pay its bills? This requires the further analysis of long-term debt versus short

Liquidity ratios are very practical in nature. For instance, can a company pay its bills? This requires the further analysis of long-term debt versus short term debt. Because a company may not have enough money to pay its short-term debt but could just convert long term assets to liquid assets (for instance sell land). And, by the way, this is the essence of the difference between liquidity (short term) and solvency (long term debt) ratios.

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