Which of the Following Is the Effect of Purchasing Merchandise

question 38

Multiple Choice

Which of the following is the effect of purchasing merchandise for cash on a company's liquidity and profitability metrics?​

• A) ​There is no effect on liquidity and profitability.
• B) ​There is an increase in liquidity, while profitability remains unchanged.
• C) ​There is an increase in profitability, while liquidity remains unchanged.
• D) ​There is an increase in both liquidity and profitability.

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Definitions:

Unrealized Gain

An unrealized gain is an increase in the value of an investment or asset that has not been sold, and consequently, the profit has not yet been taken or considered as income.

Fair Value Adjustment

Fair value adjustment involves altering the reported value of a company's assets or liabilities to reflect their current market values.

Investment Revenue

Income earned from various investments like stocks, bonds, or real estate.

Unrealized Loss

A loss that results from holding an asset that has decreased in value, but the asset has not yet been sold.