What are the different types of liquidity ratios?

A. Interest coverage ratio
B. Current ratio
C. Inventory turnover ratio
D. Gross profit ratio
E. Acid test ratio

Choose the correct answer from the options given below:

B & E only

The correct answer is option 2- B & E only.

Current ratio & Acid test ratio are the different types of liquidity ratios.

To meet its commitments, business needs liquid funds. The ability of the business to pay the amount due to stakeholders as and when it is due is known as liquidity, and the ratios calculated to measure it are known as ‘Liquidity Ratios’.  Thus, Liquidity ratios are calculated to measure the short-term solvency of the business, i.e. the firm’s ability to meet its current obligations. These are analysed by looking at the amounts of current assets and current liabilities in the balance sheet. The two ratios included in this category are current ratio and liquidity ratio.

* Current ratio is the proportion of current assets to current liabilities. It is expressed as follows: Current Ratio = Current Assets / Current Liabilities.

* Quick ratio is the ratio of quick (or liquid) asset to current liabilities. It is expressed as Quick ratio = Quick Assets / Current Liabilities. It is also known as acid test ratio or liquid ratio.

OTHER OPTIONS

A. Interest coverage ratio- SOLVENCY RATIO

C. Inventory turnover ratio- ACTIVITY RATIO

D. Gross profit ratio- PROFITABILITY RATIO