A firm's current ratio is always lower than its quick ratio (for the same accounting period).

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities, while the quick ratio is calculated by subtracting inventory from current assets and dividing the result by current liabilities. Since inventory is included in the current assets used to calculate the current ratio but excluded from the quick ratio calculation, it is possible for the current ratio to be higher than the quick ratio. Therefore, the statement is false.

A Firm's Current Ratio Is Always Lower Than Its Quick