Liquidity Buffer Ratio
factor.formula
Liquidity Buffer Ratio:
in:
- :
It represents the monetary funds held by the enterprise at the end of the reporting period t. This part of funds has extremely high liquidity and can be directly used to pay daily operating expenses and repay matured debts.
- :
It indicates the trading financial assets held by the enterprise at the end of the reporting period t. This part of assets usually refers to financial instruments that can be quickly converted into cash in the short term, such as stocks, bonds, etc., and their value fluctuations will affect the liquidity of the enterprise in the short term.
- :
It indicates the total current liabilities of the enterprise at the end of the reporting period t. Current liabilities refer to debts that the enterprise needs to repay within one year or a normal operating cycle, such as short-term loans, accounts payable, etc.
factor.explanation
The liquidity buffer ratio is an important indicator for assessing a company's short-term debt repayment ability. The higher the ratio, the more available cash and assets that can be quickly converted into cash to cover its short-term debts, and the lower the financial risk. This indicator can be used to measure the buffer capacity of a company when facing emergencies or short-term funding pressures. Compared with the traditional current ratio (current assets/current liabilities), this ratio focuses more on the company's immediately available cash assets and can more directly reflect the company's ability to cope with short-term payment obligations.