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Class 12 Tuition > Learn Commerce > How will you asses the liquidity or short term financial...
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How will you asses the liquidity or short term financial position of a business?

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We can assess the short term financial position of any concern by computing short term solvency ratio i.e. Current Ratio, liquidity ratio, Absolute liquidity Ratio.
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Crash Course Expert with 15 years of teaching experience in commerce

Short term financial position can be assessed in the following ways: 1. Current ratio: Current Assets/Current liabilities. An ideal current ratio is 2:1 but it should not be very high as it represents idle cash which has to be utilised. 2.Quick ratio(Acid test ratio): Quick Assets/Current liabilities...
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Short term financial position can be assessed in the following ways: 1. Current ratio: Current Assets/Current liabilities. An ideal current ratio is 2:1 but it should not be very high as it represents idle cash which has to be utilised. 2.Quick ratio(Acid test ratio): Quick Assets/Current liabilities where, Quick Assets=Current Assets-Closing inventory-Prepaid Expenses an ideal quick ratio is 1:1, it should not be very high as it represents idle cash. Thus from the above, we can assess the short term financial position of a business. read less
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