Personal Financial Management
A liquidity ratio is a financial metric that measures a company's ability to cover its short-term obligations with its most liquid assets. This ratio is crucial for assessing financial health, as it indicates whether an individual or organization can easily convert assets into cash to meet upcoming expenses. High liquidity ratios suggest that there are sufficient liquid assets available to deal with short-term liabilities, which is particularly important in managing cash flow and ensuring an adequate emergency fund.
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