Lesson: Liquidity and Activity Ratios

In this lesson, liquidity and activity ratios are discussed, specifically focusing on their importance, calculations, and implications for a company's performance. The liquidity ratios covered include the current ratio, quick ratio, and working capital ratio, which are crucial for assessing a company's ability to pay off debts and meet current liabilities. The lesson then delves into various activity ratios, such as accounts receivable turnover, days sales in accounts receivable, inventory turnover, and days in inventory, providing explanations on their significance, calculation methods, and how they can be used to gauge a company's efficiency in handling its inventory and receivables.