Accounting International Marketable Securities Standard

Investors and lending institutions will often use ratio analyses of the financial statements to determine a company’s profitability and liquidity. If the ratios indicate poor performance, investors may be reluctant to invest. Lending institutions make be reluctant to extend an open line of credit. Financial statement ratio analysis also allows the entrepreneur to track trends to make sure that the company is headed in the right direction.

Asset and Liabilities Liquidity Ratios

Liquidity ratios measure the company’s ability to meet its short-term debt obligations. Short-term debts are payments that are due in the very new future. Payments to vendors in accounts payable and notes payable are some examples of short-term debt obligations. Liquidity ratios are also a measurement of the company’s ready cash position. The balance sheet is used to calculate liquidity ratios.

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