The document discusses two liquidity ratios: the current ratio and acid test ratio. The current ratio measures a company's ability to pay short-term debts and obligations by comparing current assets to current liabilities, with a ratio of 2 or higher generally being considered good. The acid test ratio is similar but more stringent, excluding inventory from current assets, to assess a company's ability to meet short-term obligations without having to sell inventory. Both ratios are used to evaluate the liquidity and financial health of a company over time and compared to industry norms.