Current and quick ratios are commonly used financial metrics that measure a company’s ability to pay its near-term obligations. The current ratio measures the current assets of a company relative to its liabilities, while the quick ratio shows how quickly a company can settle its obligations with the liquid assets it has on hand. Generally, a higher ratio is seen as preferable since it indicates a greater level of liquidity and solvency. A low ratio may signal that a business is in distress, and might need to tap into its reserves or seek outside financing.
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