If a ﬁrm uses cash to purchase inventory, its quick ratio will increase.

Name: If a ﬁrm uses cash to purchase inventory, its quick ratio will increase.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The quick ratio only considers a firm's most liquid assets (cash and cash equivalents, marketable securities, and accounts receivable). Purchasing inventory with cash would decrease the amount of cash available to the firm and therefore decrease its quick ratio.

If a ﬁRm Uses Cash to Purchase Inventory, Its Quick