Which ratios help assess the firm's ability to meet cash needs as they arise?

Question

Quizplus · Accepted Answer

The current ratio and cash flow liquidity ratio are both liquidity ratios that assess a firm's ability to meet its short-term cash needs. The current ratio measures the company's ability to pay its short-term obligations with its current assets and is calculated by dividing current assets by current liabilities. The cash flow liquidity ratio measures the company's ability to generate cash to meet its obligations by comparing its operating cash flow to its current liabilities. Therefore, these ratios are the most relevant for assessing a firm's ability to meet cash needs as they arise.

Which Ratios Help Assess the Firm's Ability to Meet Cash