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Accounting Ratios — Accountancy STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceAccountancyAccounting Ratios1 Mark
Question
Selling inventory on account will cause the quick ratio to __________.
  1. Increase
  2. Decrease
  3. Have no effect
  4. None of the above
✓

Answer

  1. Increase
Explanation:

Quick assets are the current assets excluding inventory and prepaid expenses. The quick assets can be used up or converted into cash within a period of three months or less. When we sale inventory then cash will come then current asset will increase which lead to increase in quick ratio.

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