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Liquidity ratio may refer to:
In accounting, the liquidity ratio expresses a company's ability to repay short-term creditors out of its total cash. It 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
Liquidity ratios measure how quickly assets can be turned into cash in order to pay the company's short-term obligations. Following ratios can be considered to measure the liquidity of a firm.