When is the quick ratio more meaningful than the current ratio for a construction company?
Explanation
The quick ratio strips inventory and other slow current assets out of the numerator, so it matters most when a contractor's current assets are heavy with stockpiled material or unbilled work in progress that cannot become cash in time to pay this month's bills. If there is no inventory or work in progress, the quick and current ratios converge and the distinction disappears. Long-term solvency is measured with debt-to-equity and coverage ratios instead. And profitable growth often makes the problem worse, because growth consumes cash.
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