1. If inventory is sold on credit, the current ratio will a. Increase b. decreas

Question

1. If inventory is sold on credit, the current ratio will a. Increase b. decrease c. stay the same d. cannot be determined 2. If inventory is sold on credit, the quick ratio will a. Increase b. decrease c. stay the same d. cannot be determined 3. If the firm takes out a bank loan to pay its suppliers, the current ratio will a. Increase b. decrease c. stay the same d. cannot be determined 4. If the firm takes out a bank loan to pay its suppliers, the quick ratio will a. Increase b. decrease c. stay the same d. cannot be determined 5. If the firm arranges for a line of credit with a bank (for emergency purposes) that allows it to borrow at any time to pay its suppliers, the current ratio will a. Increase b. decrease c. stay the same d. cannot be determined 6. If the firm arranges for a line of credit with a bank (for emergency purposes) that allows it to borrow at any time to pay its suppliers, the quick ratio will a. Increase b. decrease c. stay the same d. cannot be determined 7. If a customer pays its overdue bill on inventory purchased six months ago, the current ratio will a. Increase b. decrease c. stay the same d. cannot be determined 8. If a customer pays its overdue bill on inventory purchased six months ago, the quick ratio will a. Increase b. decrease c. stay the same d. cannot be determined 9. If the firm uses cash to purchase additional inventories, the current ratio will a. Increase b. decrease c. stay the same d. cannot be determined 10. If the firm uses cash to purchase additional inventories, the quick ratio will a. Increase b. decrease c. stay the same d. cannot be determined

Explanation / Answer

1. If inventory is sold on credit, the current ratio will - c. stay the same

2. If inventory is sold on credit, the quick ratio will -a. Increase

3. If the firm takes out a bank loan to pay its suppliers, the current ratio - c. stay the same

4. If the firm takes out a bank loan to pay its suppliers, the quick ratio will - c. stay the same

5 If the firm arranges for a line of credit with a bank (for emergency purposes) that allows it to borrow at any time to pay its suppliers, the current ratio will - 1. Increase

6.If the firm arranges for a line of credit with a bank (for emergency purposes) that allows it to borrow at any time to pay its suppliers, the quick ratio will = a. increase

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