Debt Management

Liquidity ratios are a vital measurement of your company’s ability to cover its expenses. The most common ratios are the Current Ratio and the Quick Ratio. The Current Ratio is the reflection of the company’s financial strength. It is measured as the number of times the current assets exceed the current liabilities. The Quick Ratio is similarly calculated however only the Current Assets of Cash and Accounts Receivable balances are used for this ratio. Both ratios are used by lenders and wholesalers extending credit as they are a good indicator of the solvency of your business. The required information for these calculations are reported on your Balance Sheet.

Current Assets: Total Current Assets from the Balance Sheet	$
Accounts Receivable: Accounts Receivable Balance from the Balance Sheet	$
Cash: Cash as reported on the Balance Sheet	$
Current Liabilities: Total Current Liabilities on the Balance Sheet	$
Current Ratio: Measures the ability of a company to pay scheduled current debt with current assets with a margin of safety.
Quick Ratio: Often called the Acid Test. Measures the ability of the company to meets its obligations even in adverse financial conditions.