Two categories of ratios we cover are Liquidity ratios and Solvency ratios (the textbook calls them "Leverage and Liquidity Ratos").Watch the video below to get a better understanding of these concepts.

In the video, it is stated that a higher Current Ratio is better.There are a couple reasons that this is not completely true.What are they?(Hint: One of them hinges on why we also have the Quick or Acid Test Ratio!)

Video is below

http://www.investopedia.com/video/play/liquidity-vs-solvency/