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Solvent Ltd Has a Quick Ratio of 1

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Solvent Ltd has a quick ratio of 1.2:1 and its current liabilities amount to $200,000. If it purchased $40,000 of inventory on credit, its new quick ratio would be:


Definitions:

Pre-tax Effect

The impact on financial results before the adjustment for taxes has been made.

Units

In accounting and financial reporting, it can refer to a measure of quantity, such as items sold or produced.

Perpetual Inventory System

An inventory management system that updates inventory records for each purchase and sale in real-time.

Gross Method

An accounting practice where purchases are recorded at their gross price without deducting any cash discounts.

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