Indicates creditor contribution to liquid assets. The balance sheet presents a detailed listing of what a business owns, owes and its net worth at a specific point in time. 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.