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Liquidity ratios

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    Ibrahim Abiodun Y.
    NG
    Ibrahim Abiodun Y.

    What is the practical relevance of liquidity ratio in an inflationary economy?

    Ibrahim Abiodun Y.
    NG
    Ibrahim Abiodun Y.

    I quite agree that the liquidity ratio can be easily manipulated by borrowing long term to pay short term debts. However,the fundamental issue is the cost of capital. If the long term cost of capital is cheaper than the short term debt cost of capital it may be beneficial to the business in the long run.

    Ahmed Mohamed G.
    EG
    Ahmed Mohamed G.

    The current liabilities are business financial commitments which fall due within a business financial year. The examples are :Bank loans (which fall due within one accounting period), Trade creditors and so on.

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