Liquidity Ratios: Bankers Living in a Credit Analysts’ Paradise?

[@financialmodeling]

Files & Resources for This Video: breakingintowallstreet.com/kb/financial-statement-analysis/liquidity-ratios/ Table of Contents: 0:00 Introduction 1:39 Part 1: The Top 3 “OG” Liquidity Ratios 4:00 Part 2: Unofficial Liquidity Ratios 8:25 Part 3: Liquidity Ratios in Real Life for Illinois Tool Works 10:44 Recap and Summary

[@purudate4049]

Greetings ! Debt/ Equity ratio is superior to debt to capital ratio. I am not sure where from you have discovered debt to capital ratio

[@financialmodeling]

No ratio is universally "superior" to any other ratio. Each ratio has different advantages/disadvantages and trade-offs. Debt / Equity is useful in the WACC calculation for determining the added risk from leverage (for example), but Debt / Total Capital has other uses and can be better for industry or asset benchmarking.

[@oleksandrholovko131]

You covered the operating needs of the business and its leverage, but it would be nice to add DSCR to this tutorial to add a bit of cash flow perspective. Overall, very good video.

[@financialmodeling]

Thanks. The DSCR is not exactly a liquidity ratio and isn't that common for normal companies (outside of a few sectors). But we are planning to cover it in an upcoming series on Project Finance / Infrastructure, since it is critical there.

[@oleksandrholovko131]

​@@financialmodeling I agree, it's more about leverage than liquidity. As well as Debt/Capital, that's why I made this suggestion. But I would disagree about usage just in a few sectors, but then we need to define what sectors normal companies belong to. But yes, as a debt specialist, I would say that project finance is a type of deal where we take a close look at DSCR.

[@Malek0]

Not even a mention of LCR & NSFR?

[@financialmodeling]

Those are covered in the tutorial on bank regulatory capital: kzbin.info/www/bejne/fITRm2hmfdmNn5I You never deal with the LCR and NSFR unless you are analyzing commercial banks, so we didn't want to turn this into a 20-minute video just to cover them here.