What are Liquidity Ratios?

These ratios help in determining whether company is able to discharge its short term obligations on time

Hence it helps to determine whether company has sufficient money to meet its day to day operations


Important Liquidity Ratios



Ratio Name


Ideal Ratio

What is  better



Current Ratio

Current Assets/Current Liabilities


Higher the better

Current Assets means those assets and liabilities which are expected to be settled in 1 year


Quick Ratio


Liquidity Ratio

Quick Assets /Current Liabilities


Higher the better

Quick Assets means readily sellable current assets like Cash,Bank and FD


Short term obligations means liabilities upto 1 year

  1. Accounts and Finance
  2. Step 7 Ratio Analysis
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Step 7 Ratio Analysis

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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 10 years. He also provides Accounts Tax GST Training in Delhi and Pune.