Final answer:
The financial ratio that indicates the financial strength of an event organization is current assets divided by current liabilities, known as the current ratio. It demonstrates the company's ability to meet short-term obligations using its assets, crucial for maintaining financial stability.
Step-by-step explanation:
A financial ratio that indicates the financial strength of an event organization is current assets divided by current liabilities. This ratio, known as the current ratio, measures a company's ability to pay short-term obligations or those due within one year. It is important because it provides insight into the financial health of a company, determining if it has enough assets to cover its current debts. This is paramount on a bank's balance sheet, which lists assets and liabilities. The net worth of a bank—also known as bank capital—is essentially the excess of the asset value over the amount of the liability, or total assets minus total liabilities.
Banks maintain reserves as a part of their assets, which are funds not loaned out or invested but kept on hand, a practice that contributes to the bank's liquidity and overall financial stability. Understanding these concepts is critical for the sound financial management of any event organization, ensuring that it can withstand fluctuations in cash flow and remain solvent.