A liquid form is one that can easily make its short term obligations as they come due . given that current assets represent short term resources and current liabilities represents short term obligations how might you go about accessing a firm liquidity.
The liquidity of a business firm is measured by its ability to satisfy its short term obligations as the come due liquidity refers to the solvency of the firms over all financial position the ease with which it can pay it bills the measures of liquidity are
NWC = Current Assets â' Current Liabilities NWC = Current Assets â' Current Liabilities
= 1,240,430 - 542,025 = 1,719,948 - 1,597,703
= 698,405 = 122,245
Curent ratio: Curent assets /curent liabilities
=1240430/542052 = 1719948/ 1597703
= 2.288 = 1.07
The current ratio of 2008 is less as compared to 2007 because the amount of current liability is more as compared to the current liability amount in 2007 so it has affected current ratio
Acid test Ratio = Current assets- inventory/current liabilities
=1240430 â" 117288/542025 =1719948-207491/1597703
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