Question

A transaction involving a decrease in the Current Ratio and an increase in the Quick Ratio:

Options

• Purchase of Stock-in-Trade for cash

• Sale of Non-current Assets for Cash

• Sale of Stock-in-Trade at a loss

• Cash payment of Non-current Liability

Answer 1

Sale of Stock-in-Trade at a loss

Explanation:

• Current Ratio drops: The cash received is less than the inventory value sold, reducing total Current Assets.
• Quick Ratio rises: Inventory is not part of Quick Assets, so adding the new cash directly increases total Quick Assets.