If a company's current ratio declined in a year during which its quick ratio improved, which of the following is the most likely explanation?
A) Inventory is increasing.
B) Inventory is declining.
C) Receivables are being collected more rapidly than in the past.
D) Receivables are being collected more slowly than in the past.

Question

Quizplus · Accepted Answer

A declining inventory would decrease the current ratio (since inventory is part of current assets) but improve the quick ratio (since inventory is excluded from quick assets).

If a Company's Current Ratio Declined in a Year During