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Assume that a firm issues a six-month note to purchase inventory. Which of the following is...

Assume that a firm issues a six-month note to purchase inventory. Which of the following is true if the current ratio before the purchase is 1.0? A:The firm's quick ratio will stay the same. B:The firm's quick ratio might decrease. C:The firm's current ratio must decrease. D:The firm's current ratio will increase.

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Answer #1

Ans B:The firm's quick ratio might decrease

Quick ratio will decrease because it will decrease the assets portion. Quick ratio does not consider inventory.

Quick Ratio = (Current Assets - Inventory) / Current Liabilities.

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