Answer (A) is correct . The quick (acid test) ratio equals the quick assets (cash, marketable securities, and accounts receivable) divided by current liabilities. The current ratio is equal to current assets divided by current liabilities. The sale of inventory (not a quick current asset) on account increases accounts receivable (a quick asset), thereby changing the quick ratio. The?sale of inventory on account, however, replaces one current asset with another, and the current ratio is unaffected.
Answer (B) is incorrect because Neither ratio is changed.
Answer (C) is incorrect because The current, not the quick, ratio changes.
Answer (D) is incorrect because Both decrease.
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