Current Ratio Vs Quick Ratio

It depends of the purpose, also it reflects the behaviour of the management. depending on the quick ratio reflects that the management is conservative.

Of course I agree                                                                                                                                   because Quick ratio i s part from current ratio                                                                                                                                                                    Current Ratio = Current Assets / Current Liabilities                                                                                                                                                                        Quick Ratio = (Cash+Cash Equivalents) / Current Liabilities                                                                      Or Quick Ratio = (Current Assets - Inventory) / Current Liabilities                                                                                                                                                                                                         (Cash+ Cash equivalents)= (Current Assets - Inventory) is part from Current Assets                                                                                                                                                       that mean current ratio by logic greater than Quick Ratio.

I second the statment " Current ration is always greater than the Quick ratio." The logic behind the accuracy of this statement is that in Acid test ratio/Quick ratio we always exclude the stocks / inventory from the Current assets. The reason behind this escalation is that the stocks are not as readily convertible to as other current assets are.

Absolutely agree, because quick ratio is a part of current ratio. Current ratio findsby taking ratio between total current assets and total current liablities. where as, quick raito merely use in an environment, where there is no or less usual movent in inventory. So the amount of current assets reduce by deducting inventory from current assets. Therefore quick ratio is always less than current raio.

CR = CA ÷ CL and the QR = (CA - inventory) ÷ CL So let see these two different examples Option #1 Total CA = $100 inventory =40% of total current assets CL = $50ra Option #2 Total CA = $100 inventory =70% of the total CAN CL = $50 Then let us calculate the CR and the QR for both options option #1 CR = CA ÷ CL = CR = $100=$50 =p = (CA - inventory) ÷ CL QR = ($100 - $40) ÷ $50o QR = $60 ÷ $50 QR =1.2 option #2 CR = CA ÷ CL = CR = $100=$50 = CR =2 QR= (CA - inventory) ÷ CL QR = ($100 - $70) ÷ $50 QR = $30 ÷ $50 QR =0.6 Yes, I agree the statement saying current ratio is always greater than the quick ratio because the denominator (CL) is not affected and remains constant while the numerator (CA) is reduced when the inventory amount is deducted from the current assets. So even if the total inventory costs a single dollar, the deduction of this single dollar from the CA, then the resulting ratio (QR) will be lesser than the CR. Thanks

if organization holds the inventory then current ratio is greater than quick ratio . As we follow the formulas of both,

Current ratio = Current assets/ Current liablities

Current assets= Cash and cash equilants+Debtors+Inventory

but quick ratio formula is;

quick ratio=current assets-inventory/current liability.

For example we have100$ Current assets of which30$ is inventory and50$ current liability. Now we will find current and quick ratios.

Current ratio=100/50=2

quick ratio=100-30/50=1.4

Example proves that current ratio always greater than quick ratio if the organization holds the inventory.