If a company has current ratio of 1.0 and an acid-test ratio of 0.75, the purchase of inventory with cash affect each ratio by: b. No change to the current ratio and decrease the acid-test ratio.
Current ratio is caluculated as current assets /current liabilities while acid-test ratio is calculated as current assets-inventories/current liabilities.
Both current ratio and acid- quick ratio are important for a business as they help to determine the ability of a company to pay their short-term liabilities.
Inconlusion the current ratio should remian unchange while the acid-test ratio should be reduce.
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