What method is used to compare liquidated assets to current liabilities?

The quick ratio is used to compare liquidated assets, specifically those that can be quickly converted into cash or cash equivalents, to current liabilities. This ratio is particularly important because it assesses a company's immediate liquidity position without factoring in inventory, which may not be as easily converted to cash in the short term.

The quick ratio provides a more conservative view of a company's ability to cover its short-term obligations compared to the current ratio, which includes all current assets. By focusing only on the most liquid assets, the quick ratio helps assess whether a business can meet its current liabilities without relying on the sale of inventory. It is calculated using the formula: (Current Assets - Inventory) / Current Liabilities. This makes it a preferred measure among financial analysts when evaluating a company's solvency in times of financial distress.

Considering the context, other ratios like the current ratio also measure liquidity but include inventory, and the cash ratio solely focuses on cash and cash equivalents. The asset ratio, while relevant in different contexts, does not specifically measure liquidated assets against current liabilities in the same direct manner as the quick ratio.