The Liquidity Ratio is a financial measure used to assess the ability of a company to cover its short-term obligations. It is calculated by dividing the company’s current assets by its current liabilities and is an important indicator of the financial health of a business. A higher ratio indicates that the business has sufficient resources to pay off its bills in a timely manner, while a lower ratio suggests that it may struggle to do so. By monitoring a company’s liquidity ratio, businesses can make sure that their finances remain healthy and that they have enough readily available funds to cover their expenses.
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