Ratio Analysis

Two basic measures of liquidity are :

• Inventory turnover and Current ratio
• Current ratio and Quick ratio
• Gross Profit ratio and Operating ratio
• Current ratio and Average Collection period

Current Ratio is :

• Solvency Ratio
• Liquidity Ratio
• Activity Ratio
• Profitability Ratio

Current Ratio is :

• Liquid Assets/Current Assets
• Fixed Assets/Current Assets
• Current Assets/Current Liabilities
• Liquid Assets/Current Liabilities

Liquid Assets do not include :

• Bills Receivable
• Debtors
• Inventory
• Bank Balance

Ideal Current Ratio is :

• 1:1
• 1:2
• 1:3
• 2:1