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Liquidity Ratio: Definition, Calculation & Analysis

Instructions:

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question 1 of 3

Which of the following is a computation used to measure a company's ability to pay its short term debt?

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1. A company has $35,000 in current assets, $15,000 in long term assets, $25,000 in current liabilities and $45,000 in long term liabilities. What is its current ratio?

2. The acid ratio is also known as the:

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About This Quiz & Worksheet

This quiz/worksheet combo will help you test your understanding of liquidity ratio calculations. The quiz questions will test you on various types of ratios relevant to a company's ability to pay its debts.

Quiz & Worksheet Goals

In these assessments, you'll be tested on the following:

  • Current ratio
  • Acid ratio
  • (Cash + Cash Equivalents) / Current Liabilities
  • The meaning of a 1 to 1 ratio

Skills Practiced

This quiz and worksheet will allow you to test your skills in the following areas:

  • Reading comprehension - ensure that you draw the most important information on liquidity ratios from the related lesson
  • Making connections - use your knowledge of ratios to better understand what the ratios discussed in the related lesson mean
  • Defining key concepts - ensure that you can accurately define main phrases, such as the acid, current, and cash ratios

Additional Learning

To learn more, review the lesson Liquidity Ratio: Definition, Calculation & Analysis. This lesson covers the following objectives:

  • Define the liquidity ratio and its purpose
  • Differentiate between the current, acid, and cash ratios
  • Understand how to calculate these ratios
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