the current ratio, showing the relation between current liabilities and current assets (with slight differences in the definition). Instead of the current ratio, a liquidity ratio setting the difference between current assets and current liabilities, also defined as working capital, into relation with total assets could be used.РFigur e 2: Development of wor king capita l /total assets r a tio Data?sour ce:?Altman?(1968)?and?Ohlson?(1980);?author ’sРillustr a tioРBasically the ratio says whether the firm would be able to pay back all its’current liabilities by using its’current assets. In case it is not able to, which is when the liabilities exceed the assets, there is an insolvency risk.РC R ITIC AL R EVIEW AND C ONC L USIONРWhen doing business, constantly decisions have to be made, whose
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