Accounting liquidity

Liquidity is the ability to pay short-term obligations.

For a corporation with a published balance sheet there are various ratios used to calculate a measure of liquidity.

For instance, in a country with a legal system that gives a slow or uncertain result a higher level of liquidity would be appropriate to cover the uncertainty related to the valuation of assets.

A manufacturer with stable cash flows may find a lower quick ratio more appropriate than an Internet-based start-up corporation.

Banking regulators also view liquidity as a major concern.