what happens if ratios show a firm is not liquid 
in this case a liquidity crisis can arise even at healthy companies if circumstances arise that make it difficult to meet short term obligations such as repaying their loans and paying their employees or suppliers one example of a far reaching liquidity crisis from recent history is the global credit crunch of 2007 09 where many companies found themselves unable to secure short term financing to pay their immediate obligations the bottom lineliquidity ratios are simple yet powerful financial metrics that provide insight into a company s ability to meet its short term obligations promptly they offer a quick snapshot of the liquidity position aiding stakeholders in assessing financial stability resilience and making informed decisions 