Asked by
Kiera Conner
on Nov 08, 2024
Verified
All else the same, which of the following occurs when a firm buys inventory with cash?
A) The quick ratio goes up if it was greater than one before the change.
B) The current ratio goes down if it was greater than one before the change.
C) The current ratio goes down if it was lower than one before the change.
D) The quick ratio goes up if it was lower than one before the change.
E) The quick ratio declines but the current ratio remains unchanged.
Quick Ratio
A measure of a company's ability to meet its short-term obligations with its most liquid assets. It is calculated as (current assets - inventories) / current liabilities.
Inventory
The goods and materials a business holds for the ultimate goal of resale or processing.
Current Ratio
A measure of how well a company can satisfy its short-term due debts, revealing its liquidity over the year.
- Assess a corporation's liquidity, solvency, and profitability metrics through the examination of pertinent ratios.
Verified Answer
JL
Learning Objectives
- Assess a corporation's liquidity, solvency, and profitability metrics through the examination of pertinent ratios.