Liquidity Ratio CBSE Class 12 Accountancy Commerce Classes

Accounting Ratio is a numerical relationship between two accounting variables of financial statements. Accounting Ratio provides a deeper analysis of the liquidity, solvency, profitability and activity levels in the business. Through accounting Ratios know about the potential areas which can be improved with the effort in the desired direction. Accounting Ratios are classified from an objective point of view as Liquidity Ratios, solvency Ratios, activity Ratio, and profitability Ratio. In this article, we discussed Liquidity Ratio.

Liquidity Ratio

Current Ratio or working Ratio or 2:1 Ratio

Current Ratio represents the relationship between Current assets and Current liabilities. Current Ratio is calculated by dividing Currents by Current liabilities on a particular date.

Formula: –

Current ratio = Current Assets/Current Liabilities

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