Ratios : Liquidity vs Solvency
==============================

.. post:: Dec 30, 2020
   :tags: business

Liquidity
---------

It is *how easily can the assets be converted to cash.*

2 ratios to measure liquidity. Higher ratio is better:

**Current Ratio**

.. code::

   Current Assets / Current Liabilities

**Quick Ratio**

.. code::

   (Current Assets - Inventory) / Current Liabilities

Solvency
--------

It is *how easily can the assets be converted to cash.*

**Interest Coverage Ratio**

Higher ratio is better.

.. code::

   Operating Income / Interest Expense

**Debt to Equity Ratio**

Lower ratio is better.

.. code::

   Debt / Equity


**Soliditetsgrad** from Proff.dk

"The solvency ratio is a key figure that you can use to get an overview of how large a share of your company's assets is invested in debt, seen in relation to the size of your company's equity. The solvency ratio is a measure of how strong your company will be in a possible financial crisis." https://dinero.dk/ordbog/soliditetsgrad/

.. code::

   Equity * 100 / Assets