Wednesday, July 23, 2014

Liquidity Measurement Ratios for Analyzing a Stock ( Quick Ratio )

          

         

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    Series: Ratio Analysis  (3  post )

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    Q. Can the business pay its bills ?

    Quick Ratio or Acid Test:

    This ratio is used to check if a Company has enough Cash & Cash Equivalents to meet its current obligations or Liabilities’ quick Ration of 0.5 means a company is ready to pay off  half of its Liabilities instantaneously.
    Qucik Ration differs from Current ratio ,The Current Assets that are not readily convertible into cash are excluded from the Calculation


    Formula :      Quick ratio = (current assets – inventories) / current liabilities  Or   (cash and equivalents + marketable securities + accounts receivable) / current liabilities


    Example:
    Go to  Moneycontrol.com  Website  here is  an Online Link for the same
    http://www.moneycontrol.com/financials/relianceindustries/ratios/RI#RI   select the Ratios under the Financials Tab  & look for the  Liquidity And Solvency Ratios

    Next Post on Beginning Investing: Liquidity Measurement Ratios ( Cash Ratio )  
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    In my quest for learning value investing I came acrros this interesting article and thought would like to share this with the community
    Comments  / Improvements and points worth considering are welcome

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