Liquidity ratios are ratios that focus on the firm's ability to meet its short-term financial obligations.

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Liquidity ratios are specifically designed to measure a firm's ability to pay off its short-term obligations. These ratios measure a company's ability to generate cash quickly to meet its immediate financial obligations. Examples of common liquidity ratios include the current ratio and the quick ratio.

Liquidity Ratios Are Ratios That Focus on the Firm's Ability