Liquidity metrics assess a firm’s capacity to meet its short-term operating liabilities (maturing within 12 months) using its short-term liquid assets.

Measures general short-term financial safety:

Current Ratio = Total Current Assets / Total Current Liabilities

Excludes less liquid, harder-to-monetize current assets like inventory and prepaid expenses:

Quick Ratio = (Cash + Marketable Securities + Accounts Receivable) / Total Current Liabilities

The most conservative liquidity test, isolating pure cash and equivalents:

Cash Ratio = (Cash + Marketable Securities) / Total Current Liabilities

Efficiency metrics quantify how effectively management deploys its working capital and operational assets to generate revenues.

• Inventory Turnover = COGS / Average Inventory
• DIO = 365 / Inventory Turnover
• Receivables Turnover = Total Credit Sales / Average Accounts Receivable
• DSO = 365 / Receivables Turnover
• Payables Turnover = (COGS or Total Purchases) / Average Accounts Payable
• DPO = 365 / Payables Turnover
• Total Asset Turnover = Total Revenue / Average Total Assets