Two discussion questions
Discuss two of the following questions
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- These two ratios are meant to evaluate the financial ability of a company to clear its current liabilities. However, the two ratios differ in terms of scope and focus, with the quick ratio focusing more on the firm’s liquid assets and therefore give a vivid picture of the financial ability of a company to clear its current debt obligations. The following are the formulas of the two ratios:
Current ratio(cr) = (cash + inventory + m. securities + receivables) / current liabilities
Quick ratio (acid test ratio) = (cash + m. securities + receivables)/ current liabilities
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