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Accounting At Your Fingertips, 2e by George Murray, CPA.

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13.4 Measuring Liquidity

Current Assets Ratio

Quick Ratio

Inventory Turnover

Accounts Receivable Turnover

Average Age of Accounts Receivable

Asset Turnover

Liquidity ratios measure your company’s ability to pay its expenses and obligations in the short term as well as meeting any unexpected needs for cash. In this subchapter, we introduce some different liquidity ratios and show you how to use them.

Current Assets Ratio

The current assets ratio is one of the most common ratios. You can use it to measure your company’s ability to pay short-term (or current) debt and expenses.

Current assets ÷ Current liabilities = Current assets ratio

If your company has current assets of $80,000 and current liabilities of $50,000, your current assets ratio ...

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