Financial ratios that examine if an organization can pay short term liabilities and debts.

Two types: current ratio and acid test ratio Current ratio Acid ratio

  • finish notes on this
  • Liquidity crisis: a business that can’t pay it’s short term debts (they could go bankrupt!)
  • 1:1 ratio is minimum good ratio for current ratio (you have enough money to pay off your assets)
  • acid test ratio is the same as current ratio, but it assumes you don’t want to sell your stocks