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April 21, 2015

Homework Help: accounting

Posted by help on Saturday, January 19, 2008 at 8:01pm.

Can someone please check my answer to this question:
In recent years, a company has greatly increased its current ratio. At the same time, the quick ratio has fallen. What has happened? Has the liquidity of the company improved?

My answer: The decrease in the quick ratio shows that the company spent money on purchasing inventory. The liquidity of the company has not improved because inventory is not liquid.

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