Course · Act III: Reading the Numbers · Chapter 15
Liquidity and solvency ratios
Whether a company can survive a bad year: current and quick ratios, net debt, EBITDA and interest coverage.
Key terms
- Current / quick ratio
- Current assets (excluding inventory, for quick) ÷ current liabilities. Short-term liquidity.
- Net debt
- Debt − cash.
- EBITDA
- Earnings before interest, taxes, depreciation & amortization: operating income + D&A.
- Interest coverage
- Operating income ÷ interest expense.
“Can It Survive a Bad Year?” is part of the full course: 5 puzzles on liquidity and solvency ratios, with a story that carries through all five acts. Try this act’s free chapter, “Margins”, first.