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Hello sir,
I recall that changes in inventory do not impact the quick ratio at all. But the answer to this MCQ says that the quick ratio changes when inventory is sold on credit.. can you please explain on when the quick ratio does not change and when it does in regards to inventory please?Kind regards,
Rojid Nayaz.If you have watched my free lectures, you will know the the quick ratio is (current assets – inventory) / current liabilities.
If inventory is sold on credit then although the inventory falls (which does not affect the numerator) the receivables will increase (which does affect the numerator).
This is from Paper F3 🙂
i thought that a change in inventory does not affect the quick ratio. Is that correct sir?
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