Ratios : Liquidity vs Solvency¶
Liquidity¶
It is how easily can the assets be converted to cash.
2 ratios to measure liquidity. Higher ratio is better:
Current Ratio
Current Assets / Current Liabilities
Quick Ratio
(Current Assets - Inventory) / Current Liabilities
Solvency¶
It is how easily can the assets be converted to cash.
Interest Coverage Ratio
Higher ratio is better.
Operating Income / Interest Expense
Debt to Equity Ratio
Lower ratio is better.
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/
Equity * 100 / Assets