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The Liquidity Ratio is related to the Quick Ratio, but is considered as a more rigorous test of a company's ability to satisfy short term debt. Since receivables are the least certain of the current assets found in the quick ratio, it is eliminated when calculated the Liquidity Ratio. The calculation of the liquidity ratio is: (Cash + Marketable Securities) / Current Liabilities Generally, a liquidity ratio value of 1.0 or better is considered a satisfactory. With a ratio greater than 1.0, a company can satisfy current liabilities using just their cash and marketable securities. |
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