Which of the following is measure of liquidity of a concern?

Current ratio and Quick ratio

The correct answer is option 2- Current ratio and Quick ratio.

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’. These are essentially short-term in nature. 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 liquid ratio.

Current ratio is the proportion of current assets to current liabilities.

Quick or Liquid Ratio is the ratio of quick (or liquid) asset to current liabilities.