Question

quick ratio of a company is 1:1 state giving reason which of the following would improve reduce or not change the ratio 1 purchase of machine for cash 2 purchase of goods on credit 3 sale of furniture at cost 4 sale of good at a profit 5 cash received from debtors

Answer 1

Answer:

Purchase of machinery for cash will reduce the quick ratio as cash goes out of the firm thereby decreasing the amount of quick assets

Purchase of goods on credit reduces the quick ratio as it increases the amount of creditors thereby increasing the total amount of current Liabilities

Sale of furniture improves the quick ratio as cash comes into the organization thereby increasing the amount of quick assets.

Sale of goods at a profit improves the quick ratio as cash comes into the organization thereby increasing the amount of quick assets

Cash received from debtors will not change the quick ratio as it leads to decrease in one quick asset (debtors) and increase in another quick asset(cash)

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