To determine whether a company is capable of meeting its debt obligations when it becomes due, two liquidity ratios can be adapted as indexes. Two ratios are current ratio and quick ratio/acid-test ratio.
The current ratio is a liquidity ratio that’s used by investors to determine whether a company is capable of paying off all of its current liabilities using its current assets.
![Current Ratio](https://www.magicship.xyz/wp-content/uploads/2021/09/accountingliudong1-1024x512.jpg)
The quick ratio, on the other hand, is another liquidity ratio that’s typically used by investors to determine how efficient a company is at paying off all of its current liabilities using its current assets.
![Quick Ratio/Acid-Test Ratio](https://www.magicship.xyz/wp-content/uploads/2021/09/accountingliudong2-1024x512.jpg)
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