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rubad
Jun 26, 2012, 06:34 PM
What are liquidity, solvency, and financial flexibility ratio analysis.
And what these mean ?

paraclete
Jun 26, 2012, 07:03 PM
what are liquidity, solvency, and financial flexibility ratio analysis.?
and what these mean ?

Accountants use various ratios to determine the financial health of an organisation

Current ratio; the ratio of current assets to current liabilities indicates general financial stability less than 1.5 suggests caution and further analysis

Liquid assets ratio; the ratio of the current assets that can quickly be realised( ie; cash, debtors, short term investments) to current liabilities indicates whether an organisation might be able to meet its immediate debts. Less than 1.0 may mean an immediate liquidity problem. You would also need to know what arrangements the company has in place with its bankers

Times interest earned the ratio between interest expense and net profit+ interest+depreciation after tax tells you how well an organisation can meet its obligations in regard to long term debt

Solvency ratio: the ratio between net profit + depreciation to long term debt is indication of the cash available to meet obligations

ROE, ROI and EVA are used to determine how well an organisation is being managed
There are articles on financial flexiability analysis available on the net

rubad
Jun 26, 2012, 07:08 PM
Solvency ratio the ratio between net profit + depreciation to long term debt
Only long term debt or short term debt and long term debt

paraclete
Jun 26, 2012, 07:20 PM
I suggest you look through this presentation which is excellent
http://www.swlearning.com/finance/maness/short-term3e/powerpoint/CHAP_2.ppt#22

rubad
Jun 26, 2012, 07:24 PM
Thank you