A Company Bought Inventory for Cash

question 32

Multiple Choice

A company bought inventory for cash.Which of the following statements about their current ratio and quick ratio is true?

• A)Both ratios would increase.
• B)The current ratio would not change, but the quick ratio would decrease.
• C)The current ratio would not change, but the quick ratio would increase.
• D)Both ratios would decrease.

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Definitions:

NPV

Net Present Value (NPV) is a financial metric that calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Cash Flow

The overall movement of capital entering and leaving a firm, which directly affects its solvency.

IRR

The Internal Rate of Return is a financial measure utilized in the evaluation of capital investments to determine their expected profitability.

Cash Flow

The overall volume of financial resources circulated within and out of an enterprise, affecting its solvency.