News

Shanghai Gold exchange has increased the trade margin for some gold futures contracts

Not bullish, at the margin.

Gold had managed to retrace the losses on Trump’s comments earlier:

• Trump said had no intention of firing Fed Chair Powell (he did). Major reversal from Trump

• Trump backing away from tariffs, backing away from firing Powell – will it last?
• Trump says he has no plans to Fire Federal Reserve Chair Powell
• Trump says he is going to be very nice to China, they have to make a deal

Losing some ground now:

This article was written by Eamonn Sheridan at www.forexlive.com.

Liquidity Ratios: How to Measure a Company’s Ability to Survive the Short Term

Liquidity ratios are essential for assessing a company’s financial health—especially its ability to meet short-term obligations. These ratios are a critical lens for evaluating financial risk, particularly during periods of volatility, recessions, or when investing in companies with tight cash positions. In this guide, we cover the key liquidity ratios, show how to interpret them in various market phases, and explore their significance across sectors.

What Are Liquidity Ratios?

Liquidity ratios evaluate a company’s ability to cover its short-term liabilities using its most liquid assets. They are vital in determining whether a firm can pay its bills, manage daily operations, and avoid cash crunches.

Key Liquidity Ratios Explained

1. Current Ratio

Formula: Current Assets / Current Liabilities

• Measures general short-term liquidity.

• A ratio above 1.0 indicates more assets than liabilities; under 1.0 may raise red flags.

• Too high (>3.0) may signal underutilized assets.

Example: A current ratio of 1.8 means the company has $1.80 in current assets for every $1 in current liabilities.

2. Quick Ratio (Acid-Test Ratio)

Formula: (Current Assets – Inventory) / Current Liabilities

• Stricter test of liquidity—excludes inventory, which may not be quickly convertible to cash.

• More useful in industries with slow inventory turnover.

Example: A quick ratio of 0.9 means the company may struggle to meet obligations without selling inventory.

3. Cash Ratio

Formula: Cash and Equivalents / Current Liabilities

• Most conservative ratio—measures immediate liquidity.

• Often low for capital-light, growth firms; more relevant in stressed sectors.

Example: A cash ratio of 0.4 means only 40% of short-term liabilities could be covered immediately.

Market Phase Interpretation

📈 Bull Market

• Liquidity ratios receive less attention unless signs of overheating or poor working capital management emerge.

• Low ratios may be tolerated for high-growth companies reinvesting capital.

📉 Bear Market

• Cash becomes king. Investors scrutinize liquidity to identify which firms may default or delay payments.

• A quick ratio below 1.0 is a red flag unless the firm operates in a predictable cash-flow sector.

✨ Recovery / Transition Phase

• Companies showing improved liquidity post-crisis are favored.

• Rising current and quick ratios can signal operational stabilization.

Sector-Specific Benchmarks

Red Flags to Watch

• Current ratio below 1.0 in volatile or cyclical sectors

• Quick ratio consistently <0.8 with rising debt

• Deteriorating trends in liquidity ratios over several quarters

• Large jump in payables not matched by receivables or cash growth

• Inventory buildup causing distortion in current ratio

Case Study: Liquidity Health Comparison

Company A (Cloud Software)

• Current Ratio: 2.5

• Quick Ratio: 2.2

• Cash Ratio: 1.8

Strong liquidity due to recurring revenues and high cash reserves. Minimal inventory.

Company B (Fashion Retailer)

• Current Ratio: 1.3

• Quick Ratio: 0.7

• Cash Ratio: 0.4

Moderate liquidity. Relies on inventory turnover. Would be riskier in a downturn or credit crunch.

Tips for Interpreting Liquidity Ratios

• Always analyze trends, not just current values.

• Compare to peer group averages.

• Adjust for seasonality (e.g., retailers may build inventory ahead of holidays).

• Pair with cash flow from operations to confirm cash generation.

• Investigate credit facilities or undrawn revolvers for backup liquidity.

———————

We at ForexLive.com (evolving to investingLive.com later this year) are continuing to educate investors. In this case, understanding liquidity ratios helps you identify companies that can survive shocks, manage obligations, and keep the lights on when markets turn hostile.

Liquidity doesn’t guarantee success—but the lack of it almost always guarantees trouble.

This article was written by Itai Levitan at www.forexlive.com.

Japan economy minister Akazawa could visit U.S. for tariff talks as early as April 30, TV Asahi reports

Thats him the hat

This article was written by Eamonn Sheridan at www.forexlive.com.

Minneapolis Fed President Neel Kashkari said overnight that it’s “too soon” to determine the future path of US interest rates. While he acknowledged that tariffs alone may not necessarily reignite persistent inflation, he emphasized that Fed cannot dismiss the risk, especially given the still-elevated price levels in recent months. At the same time, Kashkari noted […]

The post Fed’s Kashkari warns of policy dilemma amid tariff tensions and market strains appeared first on Action Forex.

Key Highlights Bitcoin price started a steady increase above the $90,000 resistance. BTC cleared a key contracting triangle with resistance at $85,300 on the 4-hour chart. Ethereum price rallied over 10% and must clear the $1,800 resistance to continue higher. Gold surged to set a record high at $3,500 before it corrected some gains. Bitcoin […]

The post Bitcoin Ignites Upside Push – Can It Blaze Past $95K? appeared first on Action Forex.