Enter the cash & cash equivalents, marketable securities, accounts receivable, and current liabilities into the calculator to determine the liquidity ratio.

## Liquidity Ratio Formula

The following formula can be used to calculate the liquidity of a company.

LR =(C + S + AR) / L

- Where LR is the liquidity ratio
- C is the cash and cash equivalents ($)
- S is the marketable securities value ($)
- AR is the accounts receivables ($)
- L is the total liabilities ($)

## Liquidity Ratio Definition

A liquidity ratio is defined as the measure of how well positioned a company is to pay off it’s liabilities.

## Liquidity Ratio Example

How to calculate liquidity ratio?

**First, determine the cash on hand.**Calculate the amount of cash and cash equivalents the business has on hand.

**Next, determine the marketable securities.**Calculate the value of all securities that could be sold in short notice.

**Next, determine the accounts receivable.**Measure the total accounts receivable for the year.

**Next, determine the total liabilities.**Calculate the total liabilities.

**Finally, calculate the liquidity ratio.**Using the formula presented above, calculate the liquidity ratio.

## FAQ

**What is a liquidity ratio?**

A liquidity ratio is a measure of how “liquid” a company is. Liquidity measures the ability of a company to pay off it’s current liabilities within one year. In other words, the ability of a company to meet short term financial obligations.

**Is liquidity ratio and quick ratio the same?**

In a sense, yes, the quick ratio formula is used to calculate the liquidity ratio.

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