Liquidity

9 pages carry this tag.

Concept Guides

Concept Guide

Working Capital

Working capital is the cash tied up in the day-to-day running of a business.

8 min readRead more

Concept Guide

Liquidity Ratios

Liquidity ratios answer: can this company pay its bills in the short run?

6 min readRead more

Formulas & Ratios

Formula

Debt to Equity Ratio

The debt to equity ratio compares borrowed money with shareholders' money. It shows how much of the business is financed by lenders who must be paid whether or not there is profit.

Formula

Interest Coverage Ratio

Interest coverage shows how many times over a company can pay its interest bill out of operating profit.

Formula

Quick Ratio

The quick ratio checks whether a company holds enough cash and liquid investments to pay the obligations coming due in the next few months, even in an emergency.

Formula

Current Ratio

The current ratio compares everything a company expects to turn into cash within a year with everything it must pay within a year. It is the broadest measure of short-term solvency.

Formula

Net Debt to EBITDA

Net debt to EBITDA tells you how many years of operating cash profit it would take to repay all borrowings, net of cash on hand. It is the leverage measure lenders and rating agencies actually use.

Glossary

Current Ratio

Measures a company's ability to pay short-term obligations. Compares current assets to current liabilities.

Glossary

Quick Ratio

A stricter liquidity measure that excludes inventory from current assets. Shows ability to meet obligations without selling inventory.