Many companies have to monitor closely certain ratios, such as the current ratio, due to debt covenants. Selected transactions are provided below for a company that uses a perpetual inventory system; sells its merchandise at a selling price that exceeds cost; and had a current ratio of 1.85 and a quick ratio of 1.19 before the event occurred. Required:
In the above table, indicate whether each transaction would increase (+), decrease (-), or not affect (0) the company's current ratio and quick ratio.

Question

Many companies have to monitor closely certain ratios, such as the current ratio, due to debt covenants. Selected transactions are provided below for a company that uses a perpetual inventory system; sells its merchandise at a selling price that exceeds cost; and had a current ratio of 1.85 and a quick ratio of 1.19 before the event occurred.  Required:
In the above table, indicate whether each transaction would increase (+), decrease (-), or not affect (0) the company's current ratio and quick ratio.

Quizplus · Accepted Answer

The Answer of Many companies have to monitor closely certain ratios, such as the current ratio, due to debt covenants. Selected transactions are provided below for a company that uses a perpetual inventory system; sells its merchandise at a selling price that exceeds cost; and had a current ratio of 1.85 and a quick ratio of 1.19 before the event occurred.  Required:
In the above table, indicate whether each transaction would increase (+), decrease (-), or not affect (0) the company's current ratio and quick ratio.

Many Companies Have to Monitor Closely Certain Ratios, Such as the Current