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Question
How will you assess the liquidity of a business?
Very Short Answer
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Solution
The liquidity of a business is assessed by calculating its Current Ratio and Liquid Ratio.
Formula for calculating the ratio is:
Current Ratio = `"Current Assets"/"Current Liabilities"`
Liquid Ratio = `"Liquid Assets"/"Current Liabilities"`
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Chapter 14: Ratio Analysis - PRACTICAL QUESTIONS [Page 14.151]
