The current ratio is calculated by dividing a company’s current assets by its current liabilities. Ratios of 1 or higher indicate short-term solvency.

Liquidity ratios assess if a company can cover short-term debts with available assets. Key ratios include cash, quick, current, and operating cash flow ratios. A liquidity ratio over 1 suggests a ...

“Cash is King” is more than just a cliché; it is a fundamental truth. A company can report billions in profit on its income statement, yet if it runs out of the actual money needed to pay its short ...

The Treynor ratio is a tool in portfolio analysis that helps investors assess how well a portfolio compensates them for taking on market risk, also known as systematic risk. This portfolio ratio shows ...

The debt-to-equity (D/E) ratio is a financial metric that measures a company's financial leverage by comparing its total debt to shareholders' equity. It indicates how much debt a company uses to ...

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There’s no universal safe or danger level. Ideal current ratios vary by industry. A current ratio of 1.0 means the company has $1 in current assets for every $1 in current liabilities. A ratio below 1 ...

Will Kenton is an expert on the economy and investing laws and regulations. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School ...

A business must possess enough funds to pay current financial obligations at all times to ensure continuity of business operations. Fixed-assets-to-net-worth ratio is an accounting tool that shows you ...

When you’re evaluating a potential investment, you likely look at profitability and growth, but there is one fundamental concept you must master first: liquidity. Just as a household needs enough cash ...

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