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What happen on current ratio and quick ratio if increasing inventory in later date?
Tell me what you think and then I will tell you whether you are correct or not 🙂
Currently: *assume that current asset including inventory*
current ratio – current asset / current liability
quick ratio – (current asset – inventory) / current liabilityIf increasing inventory:
current ratio – (current asset + new inventory) / (current liability + new inventory)
quick ratio – (current asset – inventory) / (current liability + new inventory)*conclusion – It will be decrease in both current and quick ratio ?
*can I get an example from sir?
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