Sale of inventory for cash will cause the current ratio to __________.
A
increase
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B
decrease
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C
remain unchanged
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D
none of these
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Solution
The correct option is A remain unchanged Current ratio = Current assets / Current liabilities
When inventory is sold for cash then, the amount of inventory decreases and simultaneously the cash balance increases and there would be no net effect on the current asset figure. And so the current ratio will remain unchanged.