Listen to a Business English Dialogue About Liquidity ratio
Roy: Hey Eva, have you ever heard of liquidity ratios in finance?
Eva: Yes, Roy. Liquidity ratios measure a company’s ability to meet short-term obligations with its current assets.
Roy: That’s right, Eva. One common liquidity ratio is the current ratio, which compares current assets to current liabilities.
Eva: Exactly, Roy. Another liquidity ratio is the quick ratio, which excludes inventory from current assets to provide a more conservative measure of liquidity.
Roy: That’s correct, Eva. Liquidity ratios are crucial for assessing a company’s financial health and its ability to handle unexpected expenses or downturns in business.
Eva: Absolutely, Roy. They help investors and creditors gauge the risk associated with investing in or lending to a particular company.
Roy: Right, Eva. Companies with higher liquidity ratios are generally considered more financially stable and less risky.
Eva: Precisely, Roy. However, it’s essential to consider industry norms and other factors when interpreting liquidity ratios.
Roy: Agreed, Eva. Liquidity ratios provide valuable insights into a company’s financial position, but they should be analyzed in conjunction with other financial metrics for a comprehensive assessment.
Eva: Absolutely, Roy. By understanding liquidity ratios, investors and stakeholders can make more informed decisions about their investments and business relationships.
Roy: Well said, Eva. Thanks for discussing liquidity ratios with me.
Eva: No problem, Roy. If you have any more questions about finance or business, feel free to ask.
Roy: Will do, Eva. Thanks again, and have a great day!
Eva: You too, Roy!