A-LevelAccountingAnalysis and communication of accounting information9706/12 · May/June 2011 · Q201 Mark

A business has $10 000 in the bank and buys inventory for $6000 paying by cheque. What is the effect of this on its current ratio and quick (acid test) ratio?

Adecreases increases

Bdecreases no effect

Cno effect decreases

Dno effect no effect

✓ Correct answer

C: no effect decreases

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Topic: Analysis and communication of accounting information, A-Level Accounting (syllabus 9706). Multiple choice, 1 mark.
Source: A-Level Accounting, May/June 2011 Paper 1 Variant 2, question 20.

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