This essay focuses on various ratios to assess liquidity. The ratios are classified in three main categories according to their use in performing
Module 2Liquidity Analysis
LO 4Compute and use various ratios to assess liquidity.
Two ratios were discussed in the last section: the gross profit ratio and the profit margin ratio. This section considers a wide range of ratios that management, analysts, and others use for a variety of purposes. The ratios are classified in three main categories according to their use in performing (1) liquidity analysis, (2) solvency analysis, and (3) profitability analysis.
there are five basic functions of a manager;
Setting and achieving objectives is the primary way a manager accomplishes and maintains success. They must also be able to convey them to their staff or employees in a compelling manner. For instance, a restaurant manager could state they want to improve service times and remind employees that faster service increases revenue and tips.
Managers evaluate the type of work, divide it into achievable tasks and effectively delegate it to staff. Organization consists of a series of relationships among individual staff as well as departments or entities inside the organization. It is the manager’s responsibility to ensure that these individuals and entities work together in harmony, which includes motivating staff members and departments to stay on task. A good manager is skill at building interpersonal relationships among their team members and can troubleshoot when members confuse their encounter challenges.
Liquidity is a relative measure of the nearness to cash of the assets and liabilities of a company. Nearness to cash deals with the length of time before cash is realize. Various ratios are used to measure liquidity, and they concern basically the company’s ability to pay its debts as they come due. Recall the distinction between the current and long-term classifications on the balance sheet. Current assets are assets that will be converted into cash or consumed within one year or within the operating cycle if the cycle is longer than one year. The operating cycle for a manufacturing company is the length of time between the purchase of raw materials and the eventual