Liquidity Ratio may refer to:
- Reserve requirement, a bank regulation that sets the minimum reserves each bank must hold.
- Acid Test (Liquidity Ratio), a ratio used to determine the liquidity of a business entity.
Liquidity ratio, expresses a company's ability to repay short-term creditors out of its total cash. The liquidity ratio is the result of dividing the total cash by short-term borrowings. It shows the number of times short-term liabilities are covered by cash. If the value is greater than 1.00, it means fully covered.
The formula is the following:
LR = liquid assets / short-term liabilities.
Famous quotes containing the word ratio:
“Official dignity tends to increase in inverse ratio to the importance of the country in which the office is held.”
—Aldous Huxley (1894–1963)
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