Having discussed profitability ratios, activity ratios, efficiency ratios, now let's take a closer look at liquidity measures. Staying ahead of the curve. How solvent in the short term is our corporation? The corporate landscape is littered with liquidity victims. We'll see some prime examples of that later on. Firms that were unable to meet their recurrent financial obligations had short notice. So accounting liquidity measures capture short-term solvency of the corporation. And we can easily capture that by looking at net working capital. Being the difference between current assets and current liabilities that we find on the balance sheet. We've got three liquidity ratios to work with and each one of them catches a different definition of cash. Starting with the current ratio, counting all current assets on the balance sheet, dividing by current liabilities. The quick ratio, a more narrow definition of cash capturing only cash and what we label near cash. And near cash includes short-term investments and accounts receivable to the corporation. And divide through again by the current liabilities. And then the most stringent definition of a liquidity measure is given by the cash ratio, which just measures available cash. As a fraction of the current liabilities. So if we take a closer look for our corporation Kellogg's in comparison with Kraft we see that current ratios for Kraft at least are just over one, suggesting that there is sufficient current assets available to cover the current liabilities. But that is not the case for Kellogg's. And then because we use narrower definitions of cash. We see that when we move to the quick ratio and to the cash ratio that these ratios are diminishing in value. And we can see that for Kellogg's in 2014, for example, the cash ratio is only one in ten. Is that really bad? Is that a problem? It suggests that given that most of these meshes are actually less than one, that both Kellogg's and Kraft are not really able to meet in the short-term their recurrent obligations. But, keep in mind that they only considered the firms' current assets as they are reported on the balance sheet. Both of those firms, Kellogg's and Kraft, are likely, are very very likely indeed to generate significant cash very quickly from their operations and therefore are in fact highly liquid. Something not properly captured by any of those ratios. So the context again is important to keep in mind. So having summarized those ratios, there you have it. You've now been given the financial analyst's toolkit. Well, at least you've seen an overview of that toolkit. Starting from financial statements, we computed a series of financial ratios that give insights into the profitability, efficiency, activity of the corporation. But without management discussion and commentary, the narrative, so to speak, it's all very incomplete. So, the context is all important. What we'll also consider in the next modules is earnings announcements made at regular intervals by the corporation. And financial analysts typically include information that they glean from competitors, financial performance, the industry within the corporation operates, and, perhaps, even macro information. Macro economic information that might have a bearing on the corporation's value.