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Current ratio: measure of the ability of a firm to meet its short-term obligations. 2<x<3 optimal
Quick ratio (acid-test) measure of liquidity where only liquid assets are taken into account
Cash ratio = reveals how much the cash and marketable securities the company has on hand to pay off its current obligations
Cash flow from operations ratio: indication of a company's ability to pay its ST liabilities with the cash it produces from current operations
Receivables turnover: indicator of the effectiveness of a company's credit policy. Too high = does not offer long enough creidt, too low = difficulties collecting cash
Average receivables
Average number of days receivables outstanding: same as receivable turnover except indicates as a number of days
Average inventory
Inventory turnover: efficiency of inventory utilisation. High = rapid sales, less risk of value decrease.
Average number of days in stock
Annual purchases= + -
Payable turnover
Average number of days payables outstanding
Cash conversion cycle: how many times it takes for the company to convert collection or investment into cash. High = large amount of money invested in sales in process
Defensive interval: worst-case scenario
that estimates how many days the company has to maintain its current operations without any additional days
