# liquidity ratio

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Related to liquidity ratio: Activity Ratio, Solvency Ratios

## Cash Asset Ratio

A ratio of a company's cash and liquid assets to its total liabilities. A cash asset ratio measures a company's liquidity and how easily it can service debt and cover short-term liabilities if the need arises. As a result, potential creditors use this ratio in determining whether or not to make short-term loans. It is also called the liquidity ratio and the current ratio.

## Cash Ratio

1. A ratio of a company's cash and liquid assets to its total liabilities. A cash ratio is a measure of company's liquidity and how easily it can service debt and cover short-term liabilities if the need arises. As a result, potential creditors use this ratio in determining whether or not to make short-term loans. It is also called the liquidity ratio and the cash asset ratio.

2. In banking, a ratio of a bank's cash and cash equivalents to its demand deposits. See also: Reserve requirement.

## liquidity ratio

1. A measure of a company's ability to meet its short-term obligations achieved through a comparison of financial variables. See also current ratio, quick ratio, working capital.
2. The value of trading in a stock that is required to change the stock's price by 1%. A high ratio indicates the stock has considerable liquidity. A stock's liquidity ratio is of primary importance to institutions and traders that deal in large volume and that wish to avoid securities with a lack of liquidity.

## liquidity ratio

see CURRENT RATIO.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

## liquidity ratio

see RESERVE-ASSET RATIO.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
The calibrated reduction in statutory liquidity ratio (SLR) will continue till it reaches 18 percent.
As explained by the central bank, the liquidity ratio is computed as a percentage of a covered institution's eligible stock of liquid assets to its total qualifying liabilities.
Liquidity ratio expresses a company's ability to repay short-term creditors out of its total cash.
"Since the introduction of the new liquidity ratio, outstanding treasury bills, which are the most liquid assets, are growing at an average monthly rate of 2.4%, or 33% annually.
According to him, the bank has a strong liquidity ratio of 13.7pc and capital adequacy ratio of 17.73pc.
Accordingly, the repurchase rate and reserve repurchase rate have been maintained at 7.5 per cent and 6.5 per cent respectively while the cash reserve ratio and the statutory liquidity ratio have been left untouched at 4 per cent and 21.5 per cent.
The repurchase rate and reserve repurchase rate have also been maintained at 7.5 percent and 6.5 percent respectively while the cash reserve ratio and the statutory liquidity ratio have been left untouched at 4 percent and 21.5 percent.
Results show that the liquidity ratio measures by liquid assets to total assets is positively related to return on assets (ROA).