Finance and Securities: Liquidity and Asset Management Ratios

To determine a company's ability to pay its short-term debts and obligations.

Indicates that for every dollar of current liabilities, the company holds two dollars of current assets.

Goods are selling rapidly, and inventory is being replenished efficiently.

Measures the extent to which a company is financing its operations with debt versus equity.

The amount of time a company needs to collect its accounts receivable, indicating efficiency of credit and collection processes.

A company's current assets that can be used to pay short-term liabilities, indicating its financial health.

To evaluate the creditworthiness of customers, minimizing the risk of non-payment.

Debt financing requires repayment (with interest), while equity financing does not; equity dilutes ownership.

To establish a formal legal agreement with a bank for borrowing and repaying money over a specific period.

To sell accounts receivable to a third party at a discount to improve cash flow and reduce collection efforts.

The cumulative net earnings of a company after dividends and other distributions, reinvested in the business.

NPV = Sum of [Cash flow / (1 + discount rate)^time period] for all cash flows of the project.