Answer Posted / umesh raut
LIQUIDITY RATIO MEANS THE RATIO THROUGH WHICH WE CAN FIND
THE OVERALL POSITION OF THE CURRENT ASSETS OVER CURRENT
LIABILITIES.IT SHOWS THAT HOW MUCH CURRENT ASSET IS THERE
FOR RECOVERING THE CURRENT LIABILITIES. WE CAN CONCLUDE THE
SIMPLE RATIO OF LIQUIDITY AS FOLLOWS--
LIQUIDITY RATIO= LIQUID ASSETS/ LIQUID LIABILITIES
LIQUID ASSETS = CURRENT ASSETS-(STOCKS+PREPAID EXPENSES).
LIQUID LIBILITIES =CURRENT LIBILITIES-(BANK OVER DRAFT
+S.T.LOAN+CASH CREDIT).
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