liquidity ratio

Definition

Total dollar value of cash and marketable securities divided by current liabilities. For a bank this is the cash held by the bank as a proportion of deposits in the bank. The liquidity ratio measures the extent to which a corporation or other entity can quickly liquidate assets and cover short-term liabilities, and therefore is of interest to short-term creditors. also called cash asset ratio or cash ratio.

Use liquidity ratio in a sentence

I asked him what the liquidity ratio was and he told me to ask someone else who knew better than him.

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After the run on banks of '32, the smarter ones established a minimum liquidity ratio, to prevent the more gruesome outcomes from occurring again.

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People with valuable assets may not have a high liquidity ration if their money is all tied up in bonds where they cannot get cash whenever they would like it.

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liquidity premium theory statutory liquidity ratio