Liquidity (Global)
Availability of cash/liquid assets; ability to meet obligations.
Formula
Current Ratio = Current Assets ÷ Current Liabilities
Real World
During the 2008 financial crisis, interbank lending froze and businesses across global markets — even profitable ones — struggled to access short-term cash, triggering a liquidity crunch that forced some into administration.
Exam Focus
Distinguish liquidity (ability to pay short-term debts) from profitability (long-term returns) — conflating them loses marks.
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