Assignment:
Which of the following actions will cause an increase in the quick ratio in the short run?
A) $1,000 worth of inventory is sold, and an account receivable is created. The receivable exceeds the inventory by the amount of profit of the sale, which is added to retained earnings.
B) A small subsidiary which was acquired for $100,000 two years ago and which was generating profits at the rate of 10 percent is sold for $100,000 cash. (Average company profits are 15 percent of assets.)
C) Marketable securities are sold at cost.
D) All of the above.
E) Both the first and second actions listed above will cause an increase in the quick ratio in the short run.