Liquidity Analysis

Liquidity analysis refers to assessing a company's ability to meet its short-term financial obligations using its most liquid assets, like cash or easily sellable investments. It helps determine whether a business can quickly convert its assets into cash to cover debts or expenses. Key metrics include the current ratio and quick ratio, which compare current assets to current liabilities. A strong liquidity position indicates financial health and stability, while weak liquidity may signal potential difficulties in managing day-to-day operations or honoring commitments. Understanding liquidity is essential for investors and stakeholders evaluating a company's financial strength.