The current ratio is a more severe test of a firm's liquidity than the quick ratio.

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The quick ratio, also known as the acid test ratio, is a more severe test of a firm's liquidity as it only considers the most liquid current assets (cash, marketable securities, and accounts receivable) compared to current liabilities. The current ratio, on the other hand, includes all current assets in the numerator, including less liquid assets such as inventory, which may not be easily converted to cash in the short term.

The Current Ratio Is a More Severe Test of a Firm's