Liquidity

The liquidity ratio measures the short-term ability to pay its maturing obligations and ability to meet unexpected cash needs. In my opinion the most important liquidity ratio is the acid-test (quick) ration. I believe this is the most important because it allows the company to immediately see the short-term liquidity and it is an important complement to the current ration. The internal users that will benefit from acid-test ratio are the finance and marketing department. The reason is that they can keep an account of the short-term liquidity. The external users that will benefit is investors. This ratio will help them to determine how the company handles unexpected cash needs. The profitability ratio measures the income or operating success of the company for a period of time. The most important ratio is the profit margin. In my opinion it is the most important because it allows the company to measures the percentage each dollar of sales that result in net income. The internal and external users that will benefit from this ratio are finance, marking, management, investors, and creditors. The all will benefit because it will allow them to determine how much and fast they will earn net income which will result in profit and fast payback on liabilities. The Solvency ratios measure the ability of the company’s survival over a long period of time. In my opinion the debt to total assets is the most important ratio. This will help measure the percentage of the total assets a creditor will provide and act as leverage for the company. The internal users that will benefit most from this ratio are fiancé, investors, and creditors. Finance users will be able to determine how much leverage they can use to about credit, investors will determine how much money they can invest based on the company’s assets and creditors can determine how much to lend companies.