Several metrics can be used to measure a company's liquidity:
1. Current Ratio: This ratio is calculated by dividing current assets by current liabilities. A ratio of 1 or above indicates that the company can cover its short-term obligations. 2. Quick Ratio: Also known as the acid-test ratio, it is calculated by subtracting inventory from current assets and then dividing by current liabilities. This ratio provides a more stringent measure of liquidity. 3. Cash Ratio: This ratio measures the extent to which a company can cover its short-term liabilities using only its cash and cash equivalents. It is calculated by dividing cash and cash equivalents by current liabilities.