Using Liquidity Ratios & Formulas in Financial Analysis


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XYZ Corporation's accountant calculates a liquidity ratio that removes inventory from the formula to get a truer analysis of their ability to pay current liabilities with current assets. Which ratio did he use?

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1. Which ratios are considered baseline ratios?

2. Which shows the correct formula for calculating the operating cash ratio?

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About This Quiz & Worksheet

Test what you know about liquidity ratios in financial analysis with this quiz and worksheet. Several of these practice questions deal with the formulas involved in this kind of analysis.

Quiz & Worksheet Goals

We set up this quiz and worksheet to help you measure your knowledge regarding:

  • Formulas associated with different ratios
  • The role of inventory in quick ratio calculation
  • Uses of various ratios

Skills Practiced

Complete this quiz to get the practice you need with these skills:

  • Reading comprehension - ensure that you draw the most important information from the related lesson on how to use liquidity ratios and formulas in financial analysis
  • Information recall - access the knowledge you've gained regarding baseline ratios
  • Knowledge application - use your knowledge to answer questions about the formulas for operating cash ratios and current ratios

Additional Learning

The lesson associated with this quiz, titled Using Liquidity Ratios & Formulas in Financial Analysis, is available to help you further develop your understanding of this topic. Accessing this lesson will allow you to study:

  • The definition of liquidity
  • What a current ratio shows
  • Another term for the quick ratio
  • How the operating cost ratio is used