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Hi Sir
If X sells some inventory on credit for a profit. All else being equal.
What would happen to the quick and current ratio?
The answer is both increase. But for me the quick has not effect and the current increase.Sir I don’t understand why quick should be affected has the inventory in not included at the first place.
Thanksanswer is quick ratio increases as quick ratio has no inventory in d numerator so it increases recivables but not inventory. and current ratio has no effect since numerator reduces inventory and inceases recievables by same amont.
rexon1994: Please do not answer in this forum – it is the Ask the Tutor Forum, and you are not the tutor. (But please do help people in the other F9 forum).
Also, your answer is not correct.josy87:
The inventory is being sold at a profit.
So for the quick ratio, receivables will be higher, inventory is ignored anyway, so with higher receivables the quick ratio will increase.For the current ratio, inventory reduces but receivables increase by a great amount (because the inventory is sold at a profit). So the total current assets will increase and therefore the current ratio will increase.
Thanks Sir.I totally ignore the receivable. I just started with my revision as I am for June with p1.Sir is it a good combination? F9 is my Last F paper.
sorry for replying here..i was not aware about it…and thanks for that current ratio part where i had forgot about profit consideration. thank u
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