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26 March, 23:59

If the trend of the current ratio is increasing, while the trend of the acid-test ratio is decreasing over a period of time, this could be

a. a warning that the firm is: paying "extra" dividends.

b. purchasing too much treasury stock.

c. carrying excess inventories.

d. depleting its inventories.

e. having trouble collecting its accounts receivables.

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Answers (1)
  1. 27 March, 01:16
    0
    c. carrying excess inventories.

    Explanation:

    The current ratio of a company is used to measures whether the company has enough of its resources to meet the short-term obligations. It is used to compare an organization's current assets to the current liabilities of it. It is also known as liquidity ratio.

    The acid test ratio compares a company's total cash and accounts receivable to the total current liabilities of the company. It is also known as quick ratio.

    The current ratio of a company is increasing means the company is having more inventories in stock. This inventories can be considered as assets which is not quickly liquidated.

    Hence the correct option is (c).
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Home » Social Studies » If the trend of the current ratio is increasing, while the trend of the acid-test ratio is decreasing over a period of time, this could be a. a warning that the firm is: paying "extra" dividends. b. purchasing too much treasury stock. c.
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