It calculates by dividing a company's total cash and cash equivalents by its total liabilities. A higher absolute liquidity ratio indicates more excellent financial stability. Formula: absolute liquidity ratio, total liabilities, total assets. The absolute liquidity ratio can help assess a company's overall liquidity. There are two main methods for analyzing financial statements. The first method is to use horizontal and vertical analysis. Horizontal analysis is the comparison of financial information over a series of reporting periods, while vertical analysis is the proportional analysis of a financial statement, where each element of a financial statement.