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:

Trademark

A distinguishable symbol, pattern, or phrase that serves to differentiate the goods or services of one origin from those of another.

Par Value

The face value of a bond or stock as stated on the certificate or instrument.

Fair Value

An estimate of the market value of an asset or liability, based on current conditions and knowledge, used in financial reporting and analysis.

Undervalued

Describes an asset or company being priced below its true intrinsic or market value.