Financial ratios are ways of comparing and investigating the relationships between different pieces of financial information. Short-term solvency, or liquidity ratios, are intended to address the firm's ability to pay its debt over the short run without undue stress. To a firm, a high Current Ratio indicates liquidity, but it also may indicate an inefficient use of cash and other short-term assets.
Financial ratios are ways of comparing and investigating the relationships between different pieces of financial information. Short-term solvency, or liquidity ratios, are intended to addres…