Question 1

What is a good current ratio?

Accepted Answer

A current ratio between roughly 1.5 and 3.0 is generally considered healthy — enough liquidity to cover short-term obligations without leaving too much cash idle. Below 1.0 signals potential trouble paying bills.

Question 2

Why exclude inventory in the quick ratio?

Accepted Answer

Inventory can be slow or difficult to convert to cash, so the quick ratio strips it out to show whether you could meet obligations using only your most liquid assets.

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