Ratios: Which will not change the quick ratio

Assuming that current assets equal current liabilities, which of the following will not affect the quick ratio?

Question options:

- Using cash to pay off accounts payable.
- Purchasing inventories with cash.
- Selling fixed assets for cash.
- Accounts receivable are collected.

The answer is "Accounts receivable are collected". This is because an account receivable is a current asset, and so is the cash gained when collecting on it.

Selling fixed assets for cash increases current assets, which is in the numerator of the quick ratio.

Purchasing inventories with cash increases inventories, which is in the numerator of the quick ratio.

Using cash to pay off accounts payable decreases current assets and current liabilities equally, but does not change the inventories, and so will decrease the value of the quick ratio.

page revision: 3, last edited: 12 Oct 2015 04:59