Current ratio and quick ratio both help us measure the firm's liquidity.The current ratio measures the relationship of a firm's current assets to its current liabilities,while the quick ratio subtracts inventory from other current assets.

Question

Quizplus · Accepted Answer

This statement is true as it accurately describes the difference between the current ratio and quick ratio. The current ratio includes all current assets in the calculation while the quick ratio only includes quick assets, which excludes inventory. Both ratios are used to measure a firm's short-term liquidity.

Current Ratio and Quick Ratio Both Help Us Measure the Firm's