How to Calculate the Financial Liquidity Ratio
- 1). Divide the value of the current assets by the value of the current liabilities. For example, assume a business has $2,000,000 in assets and $500,000 in liabilities. $2,000,000 / $500,000 = 4. This figure represents the current liquidity ratio.
- 2). Subtract the value of a company's inventory from the company's current assets. For example, assume a company has $2 million in assets and $200,000 in inventory. $2 million - $200,000 = $1,800,000. Divide this figure by the current liabilities of the company. For example, assume the company has $500,000 in liabilities. $1.8 million / $500,000 = 3.6. This figure represents the quick liquidity ratio for the company.
- 3). Add the value of marketable securities held by the company to the cash the company has on hand. For example, assume a business has $1 million cash on hand and holds marketable securities of $500,000. $1 million + $500,000 = $1.5 million. Divide this figure by the current liabilities of the company. For example, assume the company has $500,000 in liabilities. $1.5 million / $500,000 = 3. This figure represents the cash liquidity ratio for the company.
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