During the year,Dempsey Corporation's current ratio increased while its quick ratio decreased.Which of the following could help explain this situation?
A)A decrease in accounts receivable during the year
B)An increase in accounts payable during the year
C)The sale of short-term investments during the year
D)An increase in inventory levels during the year

Question

Quizplus · Accepted Answer

An increase in inventory levels during the year would decrease the quick ratio, which only includes highly liquid assets, but would increase the current ratio, which includes all current assets. The other choices may affect the current and quick ratio differently, but not in the way described in the question.

During the Year,Dempsey Corporation's Current Ratio Increased While Its Quick