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Question
What are the differences between Current Ratio and Quick Ratio?
Distinguish Between
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Solution
| Basis of Difference | Current Ratio | Quick Ratio | |
| 1. | Relationship | It indicates the relationship between Current Assets and Current Liabilities. | It indicates the relationship between Quick Assets and Quick Liabilities. |
| 2. | Formula for computation | `"Current Ratio"="Current Assets"/"Current Liabilities"` | `"Current Ratio"="Current Assets"/"Quick Liabilities"` |
| 3. | Objective | It measures the ability of an enterprise to meet its current liabilities as and when they fall due for payment over a period normally within one year. | It measures the ability of enterprise to meet its quick liabilities without relying on the sale of inventories. |
| 4. | Ideal Standard | 2:1 | 1:1 |
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