Liquidity ratios measure the ability of a company to meet its current obligations.

Question

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Liquidity ratios are specifically designed to measure a company's ability to meet its short-term obligations, such as paying off a supplier or bank loan that is due within the next year. These ratios provide information about a company's liquidity and whether it has enough cash or liquid assets to pay its current liabilities when they become due.

Liquidity Ratios Measure the Ability of a Company to Meet