Answer (C) is correct . The quick (acid test) ratio consists of the quick assets (cash, marketable securities, and net accounts receivable) divided by current liabilities. Buying merchandise inventory with cash reduces the numerator, lowering the overall ratio.
Answer (A) is incorrect because One current asset is exchanged for another, leaving working capital unchanged.
Answer (B) is incorrect because The current ratio is current assets divided by current liabilities; exchanging one current asset for another leaves the numerator unchanged.
Answer (D) is incorrect because The price earnings ratio does not pertain to balance sheet accounts.
|
