Close Menu
TheNews247TheNews247
    Facebook X (Twitter) Instagram
    TheNews247TheNews247
    • Home
    • News
    • Business
    • Education
    • Health
    • Technology
    • Law
    • Fashion
    • Lifestyle
    • Travel
    TheNews247TheNews247
    Home»Business»Liquidity Ratio as a Determinant of Profitability
    Business

    Liquidity Ratio as a Determinant of Profitability

    LuisBy LuisMarch 5, 2021Updated:August 7, 2021No Comments2 Mins Read
    Facebook Twitter Pinterest LinkedIn Tumblr Email
    Share
    Facebook Twitter LinkedIn Pinterest Email

    Profitability of a company is measured by analyzing its Return on Equity (ROE) and Return on Assets (ROA). Liquidity of a company is measured by analyzing its Current ratio and Quick ratio.

    Current Ratio

    The current ratio is an indication of a firm’s liquidity. The current ratio is a liquidity ratio that measures whether or not a firm has enough resources to meet its short-term obligations. It compares a firm’s current assets to its current liabilities, and is expressed as follows: Current Ratio = Current Assets / Current Liabilities

    Quick ratio

    The quick ratio is an indicator of a company’s short-term liquidity, and measures a company’s ability to meet its short-term obligations with its most liquid assets. Because we’re only concerned with the most liquid assets, the ratio excludes inventories from current assets. The quick ratio is also known as the acid-test ratio. Quick ratio is calculated as follows: Quick ratio = (current assets – inventories) / current liabilities, or Quick ratio = (cash and equivalents + marketable securities + accounts receivable) / current liabilities.

    Return on assets (ROA)

    It is an indicator of how profitable a company is relative to its total assets. It is the relation between net income earned by the company and the total assets held by it. It s calculated as: ROA = Net Income / Total Assets

    Return on equity (ROE)

    It is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. ROE is expressed as a percentage and calculated as: Return on Equity = Net Income/Shareholder’s Equity

    Learn more about: f95zone

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email
    Luis
    • Website

    Related Posts

    Bukit Timah Market and Food Centre A Culinary Haven Near The Sen Condo Sustained Land

    April 23, 2025

    The Waterproof Backpack That Keeps Your Gear Dry No Matter What

    April 3, 2025

    What Is Tooling in Manufacturing? A Detailed Guide

    February 26, 2025

    Leave A Reply Cancel Reply

    You must be logged in to post a comment.

    Latest Post

    The Waterproof Backpack That Keeps Your Gear Dry No Matter What

    April 3, 2025

    Behind the Scenes with a Houston Designer: From Sketch to Runway

    July 2, 2024

    The Ultimate Guide to Choosing Blank Apparel for Your Business

    June 25, 2024

    The Evolution and Importance of Fatherhood in Modern Society – Evan Bass Men’s Clinic

    June 14, 2024
    Categories
    • Apps
    • Automotive
    • Business
    • Digital Marketing
    • Education
    • Entertainment
    • Fashion
    • Featured
    • Finance
    • Food
    • Gadget
    • Health
    • Home Improvement
    • Law
    • Lifestyle
    • News
    • Pet
    • Social Media
    • Technology
    • Travel
    • Contact us
    • Privacy Policy
    Thenews247.net © 2025, All Rights Reserved

    Type above and press Enter to search. Press Esc to cancel.