Last updated on 18 July, 2023

Our analysis conducts a meticulous evaluation of a company’s liquidity, both individually and in comparison with other companies in the same industry and within the broader S&P500 index. Liquidity is a measure of a company’s ability to meet its short-term obligations. It is a critical aspect of a company’s financial health and stability. We perform a comprehensive analysis of three specific measures that offer critical insights into a company’s liquidity status:

Metric L1: Debt-to-Equity Ratio (D/E Ratio) – This metric offers a perspective on a company’s financial leverage, calculated by dividing its total liabilities by its stockholders’ equity. A high D/E ratio can indicate that a company is aggressively financing its growth with debt, which could pose risks if profits don’t cover debt payments.

Metric L2: Current Ratio – This is a popular liquidity ratio that measures a company’s ability to pay short-term obligations. It compares a company’s current assets to its current liabilities. A current ratio above 1 suggests that the company can pay off its obligations more readily, indicating greater short-term financial strength.

Metric L3: Quick Ratio (Acid-Test Ratio) – This ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. It excludes inventory from current assets, as inventory might not be easily convertible to cash. Thus, a higher quick ratio means a more liquid current position, signifying a stronger financial health.

Each of these three metrics provide significant insights into a company’s ability to meet its short-term obligations and its overall financial stability.

We propose to discuss these three metrics regarding Liquidity below, with examples, in greater detail. (The rest of this page is incomplete, as of 18 July, 2023)