Fin 370 (finance for business) final exam a+ graded
The measure of an organization’s liquidity is the current ratio, which is calculated by dividing the current assets (i.e. cash and other assets that can be converted into cash within a year) by the current liabilities (i.e. debts due within one year). A higher current ratio indicates better liquidity, while a lower ration indicates a potential inability to meet short-term obligations. The ideal target range for most organizations is between 1-2, meaning they have sufficient resources to cover their short-term liabilities without relying too heavily on liquidation of assets or borrowing funds.
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