Del Lacy Central Lakes College

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Fiscal Fitness: Liquidity

Publish Date: June 3, 2006

Businesses all across the country have a need to be able to generate a cash flow to operate on for the year or period being looked at. At any given point in time we have measures that give us an exact position of the business. One of the measures is liquidity, which has two key component measures. These are working capital and current ratio, which are measures at a given point in time. In many businesses there are times when it may be difficult to meet all financial obligations due during the period being looked at. Good financial managers want to know about these points in time to be able to have made product sales or an operation loan to handle it. The use of these measures will help producers to better understand the financial position he is at a given time. This fact sheet will help a producer to interpret their liquidity using both measures, working capital and current ratio.

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