firm wants to strengthen its financial position.Which of the following actions would increase its quick ratio?
A)Offer price reductions along with generous credit terms that would (1) enable the firm to sell some of its excess inventory and (2)lead to an increase in accounts receivable.
B)Issue new common stock and use the proceeds to increase inventories.
C)Speed up the collection of receivables and use the cash generated to increase inventories.
D)Use some of its cash to purchase additional inventories.
E)Issue new common stock and use the proceeds to acquire additional fixed assets.

Question

Quizplus · Accepted Answer

Selling excess inventory increases cash or accounts receivable, which are part of current assets, while reducing inventory, which is not included in the quick ratio calculation. This improves the quick ratio.

Firm Wants to Strengthen Its Financial Position