Question: Explain the various rations? Ans: 1.Liquid ratio (short term solvency ratio: Liquid rations means the ability of the firm to meet it's current obligation, they

Explain the various rations? Ans: 1.Liquid ratio (short term solvency ratio: Liquid rations means the ability of the firm to meet it's current obligation, they indicate whether the firm has sufficient liquid resources to meet it's short term liabilities. The following are important liquid rations: 1.Current ratio: Current ratio is the relationship between current assets and current liabilities Current ratio: current assets/current liabilities. 2.Quick or liquid ration: It is also called acid test ratio.It is the relationship between quick assets and liabilities.Qick assets are those assets, which are readily converted into cash Quick ratio: Quick assets/Quick liabilities. 2.solvency ratio (long term) Debt _equity ratio:It establishes the relationship between share holders funds and outsiders funds Debt equity ratio: Debt/equity Or Debt equity ratio: Outsiders funds/share holders funds

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