Detailed Ratio Analysis
Liquidity ratios measure a company’s ability to meet its maturing short-term obligations. In other words,
can a company quickly convert its assets to cash without a loss in value if necessary to meet its
short-term obligations? Favorable liquidity ratios are critical to a company and its creditors within a
business or industry that does not provide a steady and predictable cash flow. They are also a key
predictor of a company’s ability to make timely payments to creditors and to continue to meet
obligations to lenders when faced with an unforeseen event.
Current Ratio
Current Assets / Current Liabilities
This ratio reflects the number of times short-term assets cover short-term liabilities and is a fairly
accurate indication of a company's ability to service its current obligations. A higher number is preferred
because it indicates a strong ability to service short-term obligations.
The current ratio for Liberty Medical
Group is 0.74, which compared to the
baseline of 0.74 indicates the
company's ability to service short-term
obligations is satisfactory. However the
value of the quick ratio will provide a
clearer indication of the company's
success in this area.
Quick Ratio
(Cash + Marketable Securities + Trade Accounts Receivable) / Current Liabilities)
This ratio, also known as the acid test ratio, measures immediate liquidity - the number of times cash,
accounts receivable, and marketable securities cover short-term obligations. A higher number is
preferred because it suggests a company has a strong ability to service short-term obligations.
The quick ratio for Liberty Medical
Group is 0.60, which compared to the
baseline of 0.60 indicates the
company's ability to service short-term
obligations is favorable.
Accounts Receivable to Working Capital
Trade Accounts Receivable / (Current Assets - Current Liabilities)
This ratio measures the dependency of working capital on the collection of receivables. A...