The quick ratio differs from the current ratio

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Reference no: EM131205524

The quick ratio differs from the current ratio in that it

1. represents the amount of cash on hand instead of the total current assets.

2. excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible collection problems.

3. is a stricter measure of a company's ability to pay its current obligations.

4. signals the need to liquidate short-term investments when it drops below 2.0.

Reference no: EM131205524

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