6. What do Liquidity Ratios do?

• measure the solvency of the business and its ability to meet short-term debts.
• measure the efficiency of the business in terms of the use of its resources in generating sales.
• measure the profitability of the business
• measure the strength of the company, its share price and its dividends.
• measure the proportion of the capital of the business which has come from external sources, and must be repaid with interest.