If a Company Has an Acid-Test Ratio of 1 $\begin{array} { l c c } & \text { Short-term Borrowing } & \text { Collection of Receivable } \\\end{array}$

question 173

Short Answer

If a company has an acid-test ratio of 1.2:1 what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio? $\begin{array} { l c c } & \text { Short-term Borrowing } & \text { Collection of Receivable } \\\end{array}$
A) $\begin{array} { l c c } &&& \text { Increase } &&&&&&& \text { No effect } \\\end{array}$
B) $\begin{array} { l c c } &&& \text { Increase } &&&&&&& \text { Increase } \\\end{array}$
C) $\begin{array} { l c c } &&& \text { Decrease } &&&&&&& \text { No effect } \\\end{array}$
D) $\begin{array} { l c c } &&& \text { Decrease } &&&&&&& \text { Decrease }\end{array}$

• A)\(\begin{array} { l c c } &&& \text { Increase } &&&&&&& \text { No effect } \\\end{array}\)
• B)\(\begin{array} { l c c } &&& \text { Increase } &&&&&&& \text { Increase } \\\end{array}\)
• C)\(\begin{array} { l c c } &&& \text { Decrease } &&&&&&& \text { No effect } \\\end{array}\)
• D)\(\begin{array} { l c c } &&& \text { Decrease } &&&&&&& \text { Decrease }
• \end{array}\)

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