Liquidity Ratios:

Measures the company's short-term ability to pay obligations

Working Capital

Working capital measures a company’s efficiency and its short-term financial health. Positive working capital is required to ensure that a firm is able to continue its operations and has sufficient funds to satisfy both maturing short-term debt and operational expenses.

Current Ratio

Current ratio is a liquidity ratio that measures short-term debt-paying ability. Acceptable current ratios vary by industry but generally between 1.5 and 3 are healthy; in this range it indicates good short-term financial strength. If current ratio is below 1, then the company may have problems meeting its short-term obligations. If the current ratio is too high, then the company may not be efficiently using its current assets or its short-term financing facilities. This may also indicate problems in working capital management.

Quick Ratio

Measures immediate short-term liquidity, also known as: Acid test, Pounce ratio, and Liquid ratio. Generally a Quick Ratio should be greater than 1, for a company with a Quick Ratio less than 1 may not be able to pay back its current liabilities.

Defensive Interval Ratio

Defensive interval ratio (DIR) measures how many days a company can operate without having to access non-current (long-term) assets. Many people believe it to be a better liquidity measure than the quick or current ratios, especially with businesses with very little debt.

Current Cash Debt Coverage Ratio

A liquidity ratio that measures a company's ability to pay off its current liabilities in a given year from its operations. The ratio is sensitive to cash flow versus production and other costs; changes period to period can be an early signal of trends.