Liquidity ratios
A company's liquidity describes its ability to meet its short-term obligations on time. Good liquidity ensures that the company can pay its maturing debts without problems. Several ratios are used to assess liquidity, the most important of which are the Quick Ratio, Current Ratio, and financing result.
Quick Ratio
The quick ratio, or acid-test ratio, measures a company's ability to meet its short-term liabilities with its most liquid assets.
Quick Ration Interpretation Guide
A high Quick Ratio indicates strong liquidity, but a value that is too high might indicate that the company is not utilizing its cash assets efficiently. On the other hand, a low value can mean that the company has difficulties meeting its short-term debts.
Formula
Current Ratio
The current ratio measures a company's liquidity and financial buffer at the time of the financial statement. The idea is to compare the ratio of assets that can be quickly converted to cash to short-term liabilities.
Current Ratio interpretation guide
Liquidity refers to a company's ability to meet its payment obligations on time and in the most cost-effective way. A high Current Ratio indicates good liquidity, but a value that is too high may suggest that the company is not utilizing its assets efficiently. Conversely, a low value may mean that the company is having difficulty meeting its short-term obligations.
Formula
Financial result and financial result-%
The financing result indicates how much funding the company's core business operations generate. The financing result measures the company's ability to manage loan repayments and the self-financing of working capital and investments with the result from its core business operations and regular other business operations.
Financial Result and Financial Result-% Interpretation Guide
The financing result should be positive, indicating that the company can cover loan repayments and investments with its income financing. A negative financing result means that the company must finance these items by other means than income financing, which can weaken its liquidity.