If the current ratio of a company equals 2.1, the quick ratio will always be lower than 2.1. (Assume that the company also has inventory and prepaid expenses.)

Question

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The quick ratio only takes into account a company's most liquid assets, which includes cash, marketable securities, and accounts receivable. It does not include inventory and prepaid expenses. Therefore, the quick ratio will always be lower than the current ratio, which includes all current assets.

If the Current Ratio of a Company Equals 2