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Could you explain, please!

This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.

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November 29, 2020 at 10:04 am #596985
MariaSuzanskaya98
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Hello to everyone!
I was wondering if you could help me to understand the following:
Why current ratio and quick ratio increase when company sells some inventory on credit at a profit?
Thank you.
Hope to hear from you soon.
November 30, 2020 at 9:41 am #597082
John Moffat
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If they sell inventory at a profit then inventory reduces and receivables (or cash) increases by a greater amount.
Therefore current assets increase and, for the quick ratio, current assets less inventory also increase.
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