Foundations on Demand

Liquidity

In this series, you will learn what liquidity is and when a liquidity test is required. You will also learn how to calculate each of three types of liquidity tests to determine the Current Ratio, Acid Ratio or Cash Ratio.

Introduction

Get an overview of the three types of liquidity tests: the Current Ratio, Acid Ratio and Cash Ratio.
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Current Ratio

The Current Ratio indicates a company’s ability to pay its current liabilities from its current assets. Learn the formula for calculating the Current Ratio and when it is required to process loan files.

Acid Ratio

Learn how the Acid Ratio is used to measure how well a company can meet its short-term obligations with its most liquid assets.

Cash Ratio

Learn the formula for calculating the Cash Ratio—the most stringent measurement of a company’s liquidity.

4 Training Lessons