Liquidity Ratios – Current Ratio and Quick Ratio (Acid Test Ratio)

This finance video tutorial provides a basic introduction into two liquidity ratios – the current ratio and the quick ratio also known as the acid test ratio. The current ratio is equal to the current assets divided by the current liabilities. A current ratio that is greater than 1 means that the current assets are greater in value than the current liabilities. The quick ratio is equal to a company’s liquid assets divided by its current liabilities.

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