iStock_000041830758_SmallIn this month’s free video lecture, we’re talking two of the three widely used rations in management accounting: Liquidity and Solvency ratios.

Liquidity & Solvency Ratios for CMAs

This free video lecture comes from the Wiley CMAexcel CMA Review Course and features Dallon Christensen, CMA, CPA/CIPTA, discussing how investors use ratios to make decisions about the health of a business.

Here’s a quick intro to the topic: Financial statement users can use ratios to understand the relationships between key financial data. Investors are interested in the organization’s liquidity and solvency. Liquidity and solvency ratios allow stakeholders to determine whether the organization is likely to be able to meet its short-term and long-term obligations. This lesson provides a number of ratios the candidate must know to judge the financial stability of an organization.

Now Dallon:

For Part 2 of the CMA Exam, you must be able to:

  1. Explain the importance of using financial ratios to analyze company performance over time.
  2. Identify the differences between liquidity and solvency.
  3. Prepare and apply liquidity ratios to assess an organization’s ability to pay its short-term obligations.
  4. Prepare and apply solvency ratios to assess an organization’s ability to pay its short-term obligations.
  5. Define the factors that can impact the analysis of liquidity or solvency ratios.

Next month, we’ll feature the Deep Dive lecture that’s included as part of the lesson liquidity and solvency rations in the Wiley CMAexcel CMA Review Course.