Asked in Investing and Financial Markets
Are Liquidity Ratios the higher the better?
June 02, 2009 8:51AM
No. High liquidity ratios may affect the amount of capital that can be invested/used to earn. Let us say in banks, if we increase the liquidity ratio by 10% the bank would have to reduce lending by that 10% to bridge the gap. which in turn would severely affect the banks earnings.