It is a stock measure of the business' financial condition. Liquidity is a measure of the business' ability to pay its bills on time. It is the relationship between current assets and current liabilities. Liquidity is a sensitive barometer of month to month operations. The difference between total current assets and total current liabilities.
Higher ratios indicate a greater ability to pay debts.
However, too high a ratio may indicate poor asset management. Also called the Acid Test Ratio. Indicates the extent to which a company can pay current debt without relying on future sales. Quick assets are highly liquid, immediately convertible to cash. In addition to accounts receivable, they include marketable securities.