The current and quick ratio may contradict the cash flow liquidity ratio, requiring the analyst to explore the underlying components of each ratio.

Question

Quizplus · Accepted Answer

The current and quick ratios are based on balance sheet data, while the cash flow liquidity ratio is based on cash flow statement data. These ratios may have different results depending on the timing of cash inflows and outflows. Therefore, further analysis is needed to understand the reasons behind any discrepancies between the ratios.

The Current and Quick Ratio May Contradict the Cash Flow