Overall Liquidity Ratio

You go to the doctor and get a check-up. They check blood pressure, cholesterol, etc. If you were a bank, the thing they'd check is your overall liquidity ratio. It's a key provision regulators use to make sure a financial institution can withstand a bad market turn.

The measure takes the company's total assets. Then it divides that figure by the difference between total liabilities and conditional reserves. Thus, it represents the ratio between what the company has (its assets: things it could sell to raise cash if needed) and the amount it owes (its liabilities minus those conditional reserves).

Basically, the figure tracks a financial institution's wherewithal. If something goes wrong, and the company has to start scrambling for cash, does it has appropriate assets to cover its liabilities? That's the question answered by the overall liquidity ratio.