This illustrated glossary uses Visual Finance™ to provide a contextualized 'big picture' view of financial results. The examples feature data for the Round Number Company—a 'made-up company' with simplified figures. The Appendix presents an explanation of how to read Visual Finance as well as the financial statements and VF views for the Round Number Company.
Liquidity Ratios answer the question: "How well can the firm pay its liabilities that are coming due?" They measure the ability of a firm to meet Short-term financial obligations.
Current Ratio (Working Capital Ratio): Compares Current Assets to Current Liabilities.
Acid-Test Ratio (Quick Ratio): Compares the ‘most liquid’ Current Assets to Current Liabilities. The most liquid assets are Cash, Receivables and Short-term Investments.
Cash Ratio: Compares Cash to Current Liabilities. This is a “conservative” ratio because it counts only cash as liquid.
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.