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Accounting ratios: measuring company liquidity

Accounting ratios

Accounting’s main objective is to make companies grow through the study and optimization of tax rights and obligations and, in many cases, operational processes. As such, it is virtually impossible to achieve these goals without well-established indicators.

Accounting ratios serve just that, to provide important information about a company’s operations and financial statements. Discover the main liquidity accounting ratios below!

Liquidity accounting ratios
Liquidity accounting ratios are indicators that help to have a more realistic view on the financial health of the business, evaluating its ability to meet its financial obligations.

These ratios analyze balance sheet information in order to understand the current status of cash flow management and its degree of liquidity. The liquidity ratios are subdivided into 4, they are:

General liquidity
He is responsible for measuring the company’s long-term financial health, which typically consists of 12 months of appraisals of financial investments, sales and installment loans.

This indicator is calculated using the following formula:

General Liquidity = (Current Assets + Long-Term Receivables) / (Current Liabilities + Non-Current Liabilities)

Immediate liquidity
This more conservative index measures cash, bank balances and immediate financial investments to better understand the relationship between company values ​​and short-term debt.

The calculation of this index consists of:

Immediate liquidity = Available / Current Liabilities

Current liquidity
This indicator demonstrates the company’s ability to pay for its assignments in the short term with the values ​​of its current assets.

To calculate this indicator, you can use the formula:

Current liquidity = current assets / current liabilities

Dry liquidity
The dry liquidity ratio is very similar to the current liquidity indicator. The difference between the two is that, when calculating current liquidity, stocks are removed, assuming their total liquidation during the operations.

Therefore, the calculation of the dry liquidity ratio is:

Dry liquidity = (current assets – inventories) / current liabilities.

Meet Conmax

Today, after 35 years of operation, Conmax is a reference in the processes of Starting a Business and in the Auditing and Consulting Processes, which integrates the Accounting, Tax and Financial activities.

Focus on Core Business and leave your company’s accounting to Conmax.

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