Among the 100 financial and economic indicators useful for company valuation is the companys' ability to satisfy maturing short-term debt.
To that extend the Liquidity ratios are the most important ratios that the company's management shall monitor to keep under control the financial risk but also measuring the results with forecast budgeting.
It is crucial in fact to carrying out the business especially during periods of adversity like it happens nowadays for Pandemic.
Poor liquidity in fact may increase a company's cost of financing and can render it unable to pay bills and dividends to investors and shareholders so that alerting in advance the management.
Liquidity ratios used by the global community of creditors for valuation and creditworthiness are mainly the Current ratio (current ratio) and the Quick ratio (quick ratio) however these ratios are "static" ratios and not "dynamic" ratios.
Other important ratio that can add value in the process of financial risk analysis and reporting of financial information to the global community of creditors and investors about a company creditworthiness are also the Customer credit days , Vendors credit days and Inventory days. These can provide additional information over the cycle of the liquidity turnover.
The leatest shall be in fact included for a compelling financial due diligence that consider not only the "static" analysis but a "dynamic" analysis since the average of payments due and the average of collection due are suitable to measuring the overall turnover of liquidity.
Learn more about companys' liquidity ratio:
UNIGIRO Fintech: Key Performance Indicators XBRL Data Analytics Engine.
MONITORING ENTERPRISE CREDIT RISK: we can provide a Smart XBRL Data Analytics Engine Toolkit for Financial Risk Analysis to let Creditors and Investors monitoring company's creditworthiness and financial sustainability
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