Liquidity

Definition

The first ratio compares only cash and bank against short-term debt, the second adds receivables, the third also inventories. The second is the most useful figure in practice; as a guideline, a ratio of roughly one to one.

A profitable business can be illiquid: growth ties up money in stock and receivables before it comes back. That is precisely the most frequent reason growing companies fail.

What the software must be able to do

The check is the liquidity forecast: does the software bring together open receivables, open payables, wages and taxes and show the coming weeks? Few can, and it is the single most useful report there is.

Checked Aug 2026

More terms under Bookkeeping and retention: Accrual principle Accrued liabilities Annual accounts Association accounting Balance sheet Balance sheet total Book value Break-even point Business assets Business expenses Cash book Cash flow statement Cash receipts Contribution margin Cost centre Current assets Debit and credit Depreciation Double-entry bookkeeping Duty to keep accounts EBIT EBITDA Equity Equity ratio Financial year Fixed assets Fixed costs Foreign currency General ledger Gross profit Hidden reserves Income statement Inventory count Journal Journal entry Liabilities Loss carry-forward Membership dues Net profit Opening balance sheet Overheads Pass-through item Prepaid expenses Provision Record-keeping ordinance Reserves Retained profit Simple accounts Swiss SME chart of accounts Tamper resistance Turnover Value adjustment Variable costs Volunteer-run structure Voucher Year-end closing modules