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:
“People are lucky and unlucky not according to what they get absolutely, but according to the ratio between what they get and what they have been led to expect.”
—Samuel Butler (1835–1902)
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