JP Morgan Chase & Co Financial Statement Liquidity ratio is the calculation of an organization’s available cash and marketable securities against the outstanding debt. This ratio is meant to measure the organization’s ability to pay off its short-term debts. When an organization has a high ratio, it is often a excellent indicator that the organization is a low risk of default. There are two types of ratios that aid in calculating an organizations liquidity ratio; they are current ratio, and quick ratio. The current ratio is used to determine an organizations ability to pay back the organizations short-term and long-term obligations. To gage this ability the current ratio consists of the current total assets of a company (both liquid and illiquid) relative to that organizations current total liability. The formula for current ratio is as follows; Current ratio = current assets/current liabilities. …show more content…
This ratio is mainly concerned with nearly all liquid assets, this ratio excluded inventories from the composite of current assets. The quick ratio can be calculated in one of two ways; quick ratio = current assets – inventories) / current liabilities, or quick ration = (cash and equivalents + marketable securities + accounts receivable) / current liabilities. The ration that is used to calculate the quick ratio is dependent upon the data that is available at the time of the calculation. These formulas are calculated with current data from JP Morgan Chase & Co. from Current ratio = current assets / current liabilities (in