MOAZZAM ALI MOAZZAM HUSSAIN MUDASSIR SAEED SATTI USMAN KHAN QULBE ALI WAQAS AHMAD

GROUP MEMBERS

A class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.

Lequedity Ratio

There are three types

Current ratio: The current ratio is balance-sheet financial

performance measure of company liquidity. Calculation (formula) The current ratio = Current Assets / Current

Liabilities Quick ratio: “it measures current (short term) liquidity and

position of the company” The formula for the acid-test ratio is: Quick ratio = (Current Assets – Inventory) / Current

liabilities

Types of lequedity ratio

Cash ratio: Cash ratio (also called cash asset ratio) is the ratio

of a company's cash and cash equivalent assets to its total liabilities. Cash ratio is a refinement of quick ratio and indicates the extent to which readily available funds can pay off current liabilities

Calculation (formula) Cash ratio is calculated by dividing

absolute liquid assets by current liabilities: Cash ratio = Cash and cash equivalents /

Current Liabilities

Debt Ratio is a financial ratio that indicates the percentage of a company's assets that are provided via debt. It is the ratio of total debt (the sum of current liabilities and long-term liabilities) andtotal assets (the sum of current assets, fixed assets, and other assets such as 'goodwill').

Debt ratio = Total Debt / Total Assets (or alternatively)

Debt ratio = Total Liabilities / Total Assets

Debt Ratio/levarage ratio

Main purpose is to asses effecincy of a company opreation

Activity ratio

CASH AND SHORT TERM INVESTMENT…………………………$47.3RECIEVABLES…………………………..159.7INVENTORIES……………………………72.3PREPAID EXPENSES AND OTHER ASSETS……………………………32.0TOTAL CURRENT LIABILITIES………...130.11TOTAL LIABILTIES…………………………..279.4

EXAMPLE

QUICK ASSETS: CASH + RECIEVABLES 47.3 + 159.7= 207 TOTAL CURRENT ASSETS: CASH + RECIEVABLES+

INVENTORIES+PREPAID EXPENSES 47.3 + 159.7+ 72.3+32.0 = 311.3

CALCULATION

QUICK RATIO: QUICK ASSETS\ CURRENT LIABILTIES 207\130.1 = 1.59 HERE IT SHOWS THAT OUR ASSETS ARE GREATER THAN LIABILITIES.CURRENT RATIOS: CURRENT ASSETS\ CURRENT LIABILITIES 311.3\ 130.1 = 2.39 THIS RESULTS SHOWS THAT COMPANY IS IN HIGHLY LIQUIDITY STATE.