Which of the following incidents decreases the acid test ratio?
Answer: C) increase in accounts payables
- A) decrease in closing inventory
- B) Increase in receivables
- C) increase in accounts payables
- D) Increase in deferred tax liabilities
- E) None of these
Explanation
Option C, more accounts payable, pushes the quick ratio down. The ratio is liquid assets over short-term debts. Higher payables enlarge the bottom of that fraction, so the result falls. Stock is left out of the top, so a change in it has no effect. More receivables would push the ratio up, and deferred tax normally sits outside short-term debts.
Asked in: BGDCL 2024