Business Ratios Question: Download Business Ratios PDF

To illustrate the difference between the current ratio and the quick ratio, let's assume that a company's balance sheet reports current assets of $60,000 and current liabilities of $40,000. Its current assets include $35,000 of inventory and $1,000 of supplies and prepaid expenses. The company's current ratio is 1.5 to 1 [$60,000 divided by $40,000]. Its quick ratio is 0.6 to 1 [($60,000 minus $36,000) divided by $40,000].