Which of the following is true regarding the relationship of the current ratio to the quick ratio?
A)The current ratio is based on a more conservative measure of liquidity.
B)Both focus on the relationship between part or all of the firm's current assets and all of its current liabilities.
C)Both focus on the relationship between all of the firm's current assets and part or all of its current liabilities.
D)For a company in the service industry,the current ratio and quick ratio will be significantly different.

Question

Quizplus · Accepted Answer

Both the current ratio and the quick ratio measure a company's ability to meet its short-term obligations with its short-term assets. The current ratio includes all current assets, while the quick ratio excludes inventory and other less liquid current assets. Both ratios focus on the relationship between part or all of the firm's current assets (all for current ratio, part for quick ratio) and all of its current liabilities.

Which of the Following Is True Regarding the Relationship of the Current