Bharti AXA INSURANCE GLOSSARY Liquidity Ratio Liquidity ratio measures the ability of a company to pay for all its liability using its assets. The overall liquidity ratio is the ratio of total assets of a company to the difference between total liability and conditional reserves. The quick liability ratio uses the assets that are readily available for use instead of total assets. This includes cash, short-term investments, and government bonds. Regulators use the liquidity ratio to assess if an insurer, bank or other financial institute is healthy enough to cover all its liabilities. The Current Ratio is the ratio of current assets to current liability. Generally, a current ratio of 2:1 is considered ideal, but varies by the industry. A Quick Ratio, also known as Acid Test Ratio, uses quick asset instead of current assets. Quick assets equals current assets less inventory and prepaid expenses. The ideal quick ratio is generally accepted as 1:1. Another related ration is the Basic Defense Ratio. It measures the number of days for which a company can cover its cash expenses without having to get additional financing. The formula for the basic defense ratio is (Cash + Receivables + Marketable Securities) ÷ (Operating expenses +Interest + Taxes) ÷ 365 Request Call Back Category * - Select -CarTwo WheelerHealthTravelPersonal Accident Buy Renew Claim submit Related Posts Disclaimer : The information published on this website is for the public's reference only. Content of this information is to provide an overview of your Travel needs and should not be relied upon for personal, medical, legal or financial decisions and you should consult an appropriate professional for specific advice. Bharti AXA General Insurance Company Limited makes no representations about the suitability, reliability, timeliness, and accuracy of the information, travel, services, or any other items mentioned on this subject for any purpose whatsoever.