A firm's current assets increase from 1.4 million in 2014 to 1.7 million in 2015.If the firm's current liabilities are unchanged at $1.1 million,and inventory remains unchanged,what is the change in the firm's quick ratio?
A)increase of 0.28
B)no change
C)increase of 0.30
D)cannot be determined
E)increase of 1.27

Question

Quizplus · Accepted Answer

The quick ratio is calculated as (Current Assets - Inventory) / Current Liabilities. Since inventory and current liabilities remain unchanged, the increase in current assets directly increases the numerator of the quick ratio. The change in the quick ratio is the difference in the ratios from 2014 to 2015, which results in an increase of 0.28.

A Firm's Current Assets Increase from 1