Assume a company's current ratio and acid-test ratio are less than 1.0 before it purchases inventory on credit.When it makes the purchase:

Name: Assume a company's current ratio and acid-test ratio are less than 1.0 before it purchases inventory on credit.When it makes the purchase:
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Question

Quizplus · Accepted Answer

The acid-test ratio decreases because inventory is not included in the quick assets, so when inventory is purchased on credit, current liabilities increase without a corresponding increase in quick assets.

Assume a Company's Current Ratio and Acid-Test Ratio Are Less