The current ratio and inventory turnover ratios 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 inventory turnover ratio gives us an indication of how long it takes the firm to convert its inventory into cash.

Question

Quizplus · Accepted Answer

Both the current ratio and inventory turnover ratio are used to measure a firm's liquidity, with the current ratio looking at current assets versus liabilities and the inventory turnover ratio providing insight into the time it takes to transform inventory into cash.

The Current Ratio and Inventory Turnover Ratios Both Help Us