The current ratio is a less stringent test of liquidity than is the quick ratio.

Question

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The current ratio measures a company's ability to pay its current liabilities with its current assets, whereas the quick ratio only considers a company's most liquid assets (such as cash and accounts receivable) in relation to its current liabilities. As a result, the quick ratio provides a more restrictive measure of liquidity than the current ratio.

The Current Ratio Is a Less Stringent Test of Liquidity