1. Liquidity Ratios Current Ratio Acid Test Ratio

2. Current Ratio Used to Discover if: Current assets cover current liabilities or debts if a company needs to liquidate them (assets) in a hurry ex. Going out of business Current Assets Current Liabilities

3. Current Ratio Use Good ratio = 2 Pay attention to industry norm Important: Quality of current assets helps determine how quickly they can sell

4. Asset Liquidity = less liquid depending on who owes company what = most liquid Receivables = somewhat liquid = Not very liquid Add up the Value Inventory Short-term Investments = somewhat liquid = Not Liquid Stock Office Building

5. Current Ratio Use Good ratio = 2 Pay attention to industry norm Important: Quality of current assets determine how quickly they can sell

7. Acid Test Ratio Use Good ratio = 1 Pay attention to industry norm Important: used with a balance sheet or a moment in time, pay attention to Acid Test over time