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In this video, we're going to discuss about liquidity and solvency ratios that we use when analyzing a balance sheet.
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But first, let us define what is liquidity.
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Liquidity, the term liquidity, actually refers to ease with which an asset or any security could get converted into a ready cash without affecting the market price.
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And cash is said to be most liquid of assets, where as intangible, tangible items are less liquid.
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Now, the two main types of liquidity include market liquidity and accounting liquidity.
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So in other and more simpler words, when we say liquidity, this is the capability of the company to pay its short -term debt.
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Pay short -term debts.
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Okay.
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So some of the liquidity ratios, we have current ratio, quick -raceous.
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And day sales outstanding.
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So example, we have current ratio, quick ratio, and day sales outstanding.
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Now let's proceed with the second one...