Check sibling questions
Accounts and Finance
Step 7 Ratio Analysis

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

Learn in your speed, with individual attention - Teachoo Maths 1-on-1 Class

Ask a doubt
CA Maninder Singh's photo - Co-founder, Teachoo

Made by

CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 13 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.