Liquidity Ratios

The following ratios are commonly used to assess a company's liquidity. While each ratio reveals information on its own, using the ratios in tandem provides a much richer understanding of liquidity. Note that each ratio focuses on some aspect of either current liabilities or current assets.

Liquidity Ratio Relationship

Current Ratio Current Assets to Current Liabilities

Quick Ratio Cash-like Assets to Current Liabilities

Receivables Turnover Ratio Sales to Accounts Receivable

Inventory Turnover Ratio Cost of Goods Sold to Inventory

Choose a company to evaluate. Select three of the ratios shown above and calculate the performance being sure to include the components of the formula.

Provide a clear discussion of what the results tell you about the financial health of the organization. Were you aware of the companys performance in these areas?

Explain three facts that you learned about the company.

Directions to student: The final paragraph (three or four sentences) of your initial post should summarize the one or two key points that you are making in your initial response. Your main post must be two to three substantive paragraphs 150-200 total words and include at least two APA-formatted citations/references.