Liquidity Index Ratio
![Liquidity Index = [(accounts recievable * collection period) + (inventory * cycle period)] / (cash + accounts recievable + inventory)](../equations/1001_equation.gif)
A company's liquidity index tells how many days it would take a company to convert its current assets into cash.
This is helpful for financial analysts, financial management, and creditors who need to know how dependable a company is to meet its debt payments on time and whether or not the company's funds are adequate to stay in business.
To use this calculator, enter the amount of money a company is owed (accounts receivable) and the amount of days it will take to receive that money (collection period), the amount of money the company is owed in inventory (inventory) and the amount of days it will take for it to be processed (cycle period), and the amount of cash the company has (cash) in their respective boxes and press "Calculate."
Works Cited
Siegel, Joel G., Jae K. Shim, and Stephen W. Hartman. Business Formulas. New York:
McGraw-Hill, 1998.
"Liquidity Index Ratio." Bizwiz Consulting. Bizwiz Consulting. 8 August, 2006.
<http://www.bizwiz.ca/liquidity_ratio_calculation_formulas/liquidity_index.html>.
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