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Current ratio is based on the total current liabilities, whereas, quick ratio is based on most liquid current assets eliminating inventories as we all know that it will take some time to turn this into cash or other liquid assets.
Both are used for measuring short term liabilities. Hence they have difference in Numenator but both have the same Denominator. Both divided by Current Liabilities.But in case of Quick Ratio we minus Stock from Current Assests. Thanks
current ratio is equal to current assets divded by current ratios
in quick ratio current assets minus inventories divide by current liabilities.
These are used to find out the short term liquidity
Current and Quick are both used in meauring liqudity of assets the difference is that in the quick we deduct the least liquid of them which is inventory
Inventory is not included in the numerator of the quick ratio, because the company will need to replace sold inventory, But included when calclated the current ratio
The quick ratio, also called the acid test ratio, is a more conservative version of the current ratio. The quick ratio measures the firm’s ability to pay its short-term debts using its most liquid assets.
