What is the effect on the Quick Ratio when a company

successfully collects cash from its trade receivables?

A It will lead to an increase in quick ratio Correct Answer Incorrect Answer

B It will decrease the quick ratio Correct Answer Incorrect Answer

C There's a slight decline in the ratio. Correct Answer Incorrect Answer

D The ratio remains unaffected. Correct Answer Incorrect Answer

E The ratio experiences a temporary increase. Correct Answer Incorrect Answer

Solution

Both cash and debtors are part of Quick assets. The collection of cash from receivables shifts the composition of quick assets without changing the total amount, thus not affecting the Quick Ratio.

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