about accounting.....what is Profitability and liquidity ??
what is Profitability and liquidity ?? THZ!
- PKW ( PJR )Lv 71 十年前最愛解答
Profitability means how profitable the company is. It is normally measured by the gross profit, profit before tax etc. It is quite useful for inter-company comparision to see which company could generate a better profit.
Liquidity means how liquid the company could, say, repay its debts or discharge its finance obligations. it is normally measured by the net current ratio i.e. The difference between the Current Assets and the Current Liabilites. The higher the amount or ratio, the higher the liquidity. Another example, even under the current assets, the company has a better liquidity if the cash at banks is much much more than the working capital being tied up in Trade Debtors and/or Inventory