# Essay on Ratios

LIQUIDITY AND ACTIVIY

Current Ratio measures the ability of a firm to pay its short-term debts. The formula is:

|Current Ratio |= |Current Assets |

| | |Current Liabilities |

Quick (Acid-Test) Ratio measures the immediate ability of a firm to pay its short-term debts. The formula is:

|Current Ratio |= |Cash + Marketable Securities

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|Cash Flow to Sales |= |Net cash provided by |

| | |operating activities |

| | |Net Sales or Net Revenues |

Cash Flow to Assets measures the ability of assets to generate operating cash flows. The formula is:

|Cash Flow to Assets |= |Net cash provided by |

| | |operating activities |

| | |Average Total Assets |

Current Cash Debt Coverage Ratio measures a company’s ability to pay off its current liabilities from its operations. The formula is:

|Current Cash Debt Coverage Ratio |= |Net cash provided by |

| | |operating activities |

| | |Average Current