If a ﬁrm uses part of the cash it received from payment of an account receivable to buy inventory
and leaves the rest in its bank account, its current ratio will remain unchanged.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. When a firm uses part of the cash it received from payment of an account receivable to buy inventory, its current assets remain unchanged. Therefore, the current ratio will remain unchanged.

If a ﬁRm Uses Part of the Cash It Received