The extent to which short-term creditors can be paid by converting current assets, such as short-term marketable securities, accounts receivable, inventories and prepaid expenses) to cash, or the generally accepted measure of short-term solvency
Current ratio = Current Assets/Current Liabilities
A firm's ability to pay off claims of short-term creditors without relying on the sale of inventory
Quick ratio = (Current Assets - Inventory)/Current Liabilities
Copyright © Marilyn Shaw and Merri Incitti
This page last updated November 1995
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