Why would the purchase of inventory on credit would not increase the current ratio and instead decrease it whilst if current assets are 4 and current liabilities are 5 then if inventory of 1 is added to both the current ratio increases
If we purchase the inventory on credit then inventory would increase and payables increase too by the same amount. If we use the 1 in the formula then we have the following:
If current ratio increases then why in the bpp kit there is a question where there is inventory purchases on credit and an answer is given as current ratio decrease