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Liquidity Liquidity measures the ability of a firm to pay its depths The current ratio looks at the relationship between current assets and current liabilities, it examines the liquidity position of the firm The higher the ratio the safer the business A typical business should have a current ratio of 1.5 to 1 to 2:1 If it is less than this, the business may not be able to pay its bills and may loose profit The formula used for current ratio: Current ratio- Current Assets Current Liabilities Current assets are the assets of the business, which can easily be turned into cash or are cash. They are known as the liquid assets of the business. There are 4 main types of current assets:> Stocks> Debtors> Bank> Cash Current liabilities are what the business owes and will have to pay within the next 12 months, for example:> Loans> Creditors> Bank overdrafts A typical business should...

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