Assuming a Current Ratio of 1

question 143

Multiple Choice

Assuming a current ratio of 1.0 and an acid-test ratio of 0.75,how will the purchase of inventory with cash affect each ratio?

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

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Definitions:

Profit-maximizing Output

The point of production where a company attains its maximum profit.

Short-run Data

refers to information or statistical figures that capture economic activities or trends over a relatively brief period, emphasizing immediate effects rather than long-term patterns.

Competitive Firm

A business operating in a market where it has little to no influence on the prices of its products due to the presence of numerous competitors.

Total Profit Curve

A graphical representation that shows how a firm's profit varies with different levels of output.