A company has a current ratio of 2.0 and a quick ratio of 1.4.If the company then collects an accounts receivable,which of the following is a true statement?
A)The current ratio will not change and the quick ratio will increase.
B)The current ratio will increase and the quick ratio will increase.
C)The current ratio and the quick ratio will not change.
D)The current ratio will increase and the quick ratio will decrease.

Question

Quizplus · Accepted Answer

Collecting an accounts receivable will increase the company's cash, but it will also decrease the accounts receivable balance. Since both the current ratio and the quick ratio are based on current assets, which include cash and accounts receivable, the change in these two ratios will balance out and neither ratio will change. Therefore, the correct answer is C.

A Company Has a Current Ratio of 2