Debt & Liquidity

How to judge whether a company can pay its bills and handle its debt, the key coverage and liquidity ratios, and why rising interest rates change the picture.

Two different questions

Liquidity asks: can the company pay bills due in the next year? Solvency asks: can it handle all of its debt over the long run? A company can be solvent but short of cash this quarter, or have plenty of cash today but too much debt coming due in a few years. Both matter.

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