Liquidity Flashcards
What is liquidity?
The ability of a business to turn its assets into cash to pay its current liability
What is current ration equation?
and
Whst is acid ratio test equation?
current= current assets/ current liability
Acid= (current assets- inventory) / current liability
What is non current assets and current assets?
Non= something a business will own for more then a year
Current= something a business owns but will used before a year
What is current liability and non current liability?
Current= owed by a business paid within a year
Non= owed by a business paid in more then a year
What is equity?
Money invested by shareholders/ money received from shares/ retained profit
How can a business improve their liquidity?
-increase revenue
-increase cash inflows
-reducing regular costs
