Assuming a Current Ratio of 1

question 113

Multiple Choice

Assuming a current ratio of 1.0,how will the purchase of inventory with cash affect the ratio?

• A)Increase the current ratio.
• B)No change to the current ratio.
• C)Decrease the current ratio.
• D)Could either increase or decrease the current ratio.

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Definitions:

EOQ

Economic Order Quantity; the ideal order quantity a company should purchase to minimize its inventory costs, including holding, shortage, and order costs.

Just-In-Time

An inventory management strategy that aims to increase efficiency and reduce waste by receiving goods only as they are needed in the production process.

Manufacturing Firms

Companies engaged in the production of goods in large quantities, often utilizing complex machinery and human labor in factories.