A firm's ability to pay current liabilities can be evaluated using the quick ratio and the current ratio.

Question

Quizplus · Accepted Answer

The quick ratio and the current ratio are both measures of a firm's ability to pay its current liabilities. The current ratio compares current assets to current liabilities, while the quick ratio is a more conservative measure that excludes inventory from current assets. Therefore, both ratios can be used to evaluate a firm's ability to pay its current obligations.

A Firm's Ability to Pay Current Liabilities Can Be Evaluated