A transaction that will increase the quick ratio but cause the current ratio to decline is:
A) Short-term borrowing.
B) Investing cash in plant assets.
C) Sale of inventory at a price below cost.
D) Collection of an account receivable.

Question

Quizplus · Accepted Answer

The sale of inventory at a price below cost decreases current assets (inventory) but increases cash, which is a quick asset, thus increasing the quick ratio while potentially decreasing the current ratio if the reduction in inventory value is significant.

A Transaction That Will Increase the Quick Ratio but Cause