Assuming an Acid-Test Ratio of 1

question 128

Multiple Choice

Assuming an acid-test ratio of 1.0,how will the purchase of inventory with cash affect the ratio?

• A)Increase the acid-test ratio.
• B)No change to the acid-test ratio.
• C)Decrease the acid-test ratio.

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Definitions:

Investment

Allocating financial resources with the goal of achieving returns or profits.

Compounded Monthly

The process where the interest earned on an investment is calculated monthly and added to the principal sum, resulting in interest on interest.

Deposits

Money placed into a bank account or with a financial institution for safekeeping or to earn interest.

Investment

The distribution of financial resources in anticipation of earning revenue or gains.