Ratio analysis is used to assess the financial performance of a business in key areas.


Liquidity ratios are used to measure a businesses ability to pay off its short term obligations and suggest how liquid the business is.


This video is 6 minutes 36 seconds long and identifies two liquidity ratios, the first being the Current ratio and the second the liquid capital ratio, also known as the acid test ratio.


It investigates where to find the information for these ratios on a statement of financial position and how to calculate these ratios in order to analyse the businesses liquidity.

The activity worksheet gets students to apply key points from the video. It also has practice questions for them to have a go at using a balance sheet to work out the liquidity ratios for the business provided.

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