
How Liquidity Ratios Impact Business Valuation
Liquidity ratios play a direct role in business valuation by signaling how well a company can meet short-term obligations and withstand cash flow disruptions. Strong current, quick, and cash ratios reduce perceived risk, support higher valuation multiples, and improve financing terms, while weak liquidity often leads to discounts, stricter deal structures, or reduced leverage. In short, liquidity doesn’t just affect solvency—it materially influences price, risk premiums, and how a deal gets financed.





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