A company wishing to improve its acid-test ratio should:
A)purchase additional inventory for cash.
B)purchase additional inventory on account.
C)sell inventory on account.
D)do all of the above.

Question

Quizplus · Accepted Answer

Selling inventory on account would increase the company's cash balance without affecting its current liabilities, thus improving the acid-test ratio. Purchasing additional inventory would decrease the ratio, especially if done on account. Therefore, option C is the only choice that would improve the acid-test ratio.

A Company Wishing to Improve Its Acid-Test Ratio Should