InvestorQ : In last year the current ratio was 3:1 and quick ratio was 2:1.Presently current ratio is 3:1 but quick ratio is 1:1.This indicates comparably A. high liquidity B. higher stock C. lower stock D. low liquidity
Aditya Raman made post

In last year the current ratio was 3:1 and quick ratio was 2:1.Presently current ratio is 3:1 but quick ratio is 1:1.This indicates comparably A. high liquidity B. higher stock C. lower stock D. low liquidity

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Dia Deshpande answered.
6 months ago
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quick ratio is the current assets excluding the inventories. It gives an idea of the current assets that can be rapidly liquidated to take care of the current liabilities. It is considered to be a more reliable indicator of working capital liquidity compared to quick ratio because the quick ratio excludes inventory which is normally illiquid. Hence if the liquidity ratio is falling while current ratio is same, it is a sign of rising inventory levels on a relative basis.

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