Other Things Held Constant, Which of the Following Will Not

question 34

Multiple Choice

Other things held constant, which of the following will not affect the quick ratio? (Assume that current assets equal current liabilities.)

• A) Fixed assets are sold for cash.
• B) Cash is used to purchase inventories.
• C) Cash is used to pay off accounts payable.
• D) Accounts receivable are collected.
• E) Long-term debt is issued to pay off a short-term bank loan.

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Definitions:

Average Annual Income

The average amount of money earned per year over a specified period, often used to assess financial stability.

Accounting Rate of Return

A financial metric used to assess the profitability of an investment, calculated by dividing the average annual accounting profit by the initial investment cost.

Cash Payback Method

An investment appraisal technique that calculates the time needed to recoup the cost of an investment through cash flows.

Present Values

The present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return.