Liquidity KPIs measure a company’s ability to meet short-term obligations and maintain cash flow. These ratios help evaluate financial flexibility and short-term solvency.
| KPI Name | Formula | Description / Interpretation |
|---|---|---|
| Current Ratio | Current Assets ÷ Current Liabilities | Indicates short-term solvency. A ratio above 1.0 means current assets exceed current liabilities. |
| Quick Ratio (Acid Test) | (Current Assets − Inventory) ÷ Current Liabilities | Tests the ability to meet obligations using only liquid assets. |
| Cash Ratio | Cash & Cash Equivalents ÷ Current Liabilities | Measures liquidity using only immediate cash resources. |
| Operating Cash Flow Ratio | Operating Cash Flow ÷ Current Liabilities | Assesses whether cash flow from operations is sufficient to cover short-term liabilities. |
| Cash Conversion Cycle (Days) | DSO + DIO − DPO | Combines receivable, inventory, and payable days to measure cash flow efficiency. Lower days indicate stronger liquidity management. |
Notes
- Days are calculated using average balances and 365 days for the period.
- Liquidity KPIs rely on accurate classification of current assets and liabilities.
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