Securing Hannav Ledger...
Securing Hannav Ledger...
Glossary
Liquidity ratio measures ability to meet short-term obligations using liquid assets, applied to companies and personal finance planning.
Liquidity ratio checks if you have enough cash-like assets to pay bills and EMIs coming due soon — personal or business health check.
Current ratio = current assets / current liabilities. Quick ratio excludes inventory. For individuals: monthly liquid assets divided by monthly essential expenses shows months of coverage — overlaps with emergency fund sizing concept.
Liquid assets ₹6 lakh (liquid fund + savings), monthly expenses ₹1 lakh → 6-month liquidity coverage ratio, meeting recommended emergency buffer.
Liquidity Coverage = Liquid Assets ÷ Monthly Essential Expenses3–6 months essential expenses in liquid assets is standard guidance; higher for single income or freelance households.
Corporate ratios use balance sheet categories. Personal finance adapts concept to cash and liquid investments vs monthly outflows.
Excess idle cash drags long-term returns. Target minimum needed buffer; invest surplus per goals and asset allocation.