Assuming a current ratio of 1.2 and an acid-test ratio of 0.80,how will the purchase of inventory with cash affect each ratio?

Question

Quizplus · Accepted Answer

The purchase of inventory with cash will not change the current ratio because both current assets and current liabilities remain unchanged. However, it will decrease the acid-test ratio because cash (a quick asset) is reduced, while inventory (not a quick asset) increases.

Assuming a Current Ratio of 1