A firm wants to strengthen its financial position. Which of the following actions would increase its quick ratio?
A) Offer price reductions that would enable the firm to sell some of its inventory.
B) Issue new common stock and use the proceeds to increase inventories.
C) Speed up the collection of receivables and use the cash generated to increase inventories.
D) Use some of its cash to purchase additional inventories.

Question

Quizplus · Accepted Answer

Selling inventory for cash increases the quick ratio because it reduces inventory (a non-quick asset) and increases cash (a quick asset), thus improving the ratio.

A Firm Wants to Strengthen Its Financial Position