Which of the Following Statements Is Most Correct

question 50

Multiple Choice

Which of the following statements is most correct?

• A) If a company increases its current liabilities by $1,000 and simultaneously increases its inventories by $1,000, its current ratio must rise.
• B) If a company increases its current liabilities by $1,000 and simultaneously increases its inventories by $1,000, its quick ratio must fall.
• C) A company's quick ratio may never exceed its current ratio.
• D) Answers b and c are correct.
• E) None of the answers above is correct.

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Definitions:

Cash Sales

Transactions where payment for goods or services is made immediately in cash at the time of sale.

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including materials and labor.

Merchandise

Goods or products that are bought and sold by businesses in the course of trade.

Credit Terms

Conditions under which a seller extends credit to a buyer, including payment deadlines and interest rates.