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For Immediate Release
Chicago, IL – October 7, 2021 – Stocks in this week’s article are Abercrombie & Fitch Co. ANF, Hibbett, Inc. HIBB, Tesla, Inc. TSLA, Arch Resources, Inc. ARCH and Sonos, Inc. SONO.
Snap Up These 5 Top-Ranked Liquid Stocks for Solid Returns
A company with favorable liquidity has the potential to provide impressive returns as liquidity supports its business growth.
Liquidity indicates a company’s ability to clear debt obligations by converting its assets into liquid cash and equivalents. However, one should be careful about investing in a stock with high liquidity level as it may also imply that the company is failing to utilize its assets competently.
Therefore, it is advisable to consider a company’s efficiency level in addition to its liquidity for identifying potential winners. An efficient company with a favorable liquidity level may prove to be a lucrative addition to one’s portfolio.
Measures to Identify Liquid Stocks
Current Ratio: It measures current assets relative to current liabilities. This ratio is used for measuring a company’s potential to meet short- and long-term debt obligations. A current ratio — also known as working capital ratio — below 1 indicates that the company has more liabilities than assets.
However, a high current ratio does not always indicate that the company is in good financial shape. It may also indicate that the company failed to utilize its assets significantly. Hence, a range of 1-3 is considered ideal.
Quick Ratio: Unlike current ratio, quick ratio — also called “acid-test ratio" or "quick assets ratio" — reflects on a company’s ability to pay short-term obligations. It considers inventory excluding the current assets relative to current liabilities. Like the current ratio, a quick ratio of more than 1 is desirable.
Cash Ratio: This is the most conservative ratio among the three, as it takes into account cash and cash equivalents as well as invested funds relative to current liabilities. It measures a company’s ability to meet current debt obligations using the most liquid of assets. Though a cash ratio of more than 1 may point toward sound financials, a higher number may indicate inefficiency in cash utilization.
A ratio greater than 1 is desirable at all times but may not always appropriately represent a company’s financial condition.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1806149/snap-up-these-5-top-ranked-liquid-stocks-for-solid-returns
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Hibbett, Inc. (HIBB) : Free Stock Analysis Report
Sonos, Inc. (SONO) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Arch Resources Inc. (ARCH) : Free Stock Analysis Report
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