Liquidity ratios, such as the current ratio and quick ratio, measure a company's ability to...
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Liquidity ratios, such as the current ratio and quick ratio, measure a company's ability to meet its shortterm obligations using its most liquid assets. These ratios provide insights into the company's shortterm financial health and operational efficiency. A higher liquidity ratio indicates a better capability to pay off shortterm debts, which is crucial for maintaining solvency and avoiding financial distress. Stakeholders, including investors and creditors, use liquidity ratios to assess the risk associated with the company's financial structure and to make informed lending or investment decisions.
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