Key Terms
- Current Assets: Current Assets are those assets which can be converted into cash within a maximum period of one year (or) during the normal operating cycle of the business.
- Current Liabilities: Current Liabilities are the debts which are to be paid within a year, or paid during the normal operating cycle of the business.
- Current Ratio: The Current Ratio is the relationship between Current Assets and Current Liabilities.
- Quick Ratio: The Quick Ratio is the relationship between total quick assets and the total Current Liabilities.
- Profitability Ratio: The ability of a business to earn income is called profitability.
- Ratio Analysis: Ratio analysis is finding the relation between the two variables taken from the financial statements.
- Working Capital: Working capital is the difference between Current Assets and Current Liabilities.
- Liquidity: Liquidity refers to the ability with which an asset can be changed into cash.