Answer:
Option B, have the same intercept with a flatter slope; fall.
Explanation:
Option B is correct because a more risk-averse person faces a steeper curve while the less risk-averse person faces a flatter slope. While the more risk-averse person has more return on the stock while the less risk-averse person has less return. Therefore, in the given situation, the SML will have the flatter slope and its return will fall. As it is a less risk-averse investor.
RamsayRamsay Travel offers helicopter service from suburban towns to John F. Kennedy International Airport in New York City. Each of its 12 helicopters makes between 900 and 1,500 round-trips per year. The records indicate that a helicopter that has made 900round-trips in the year incurs an average operating cost of $750 per round-trip, and one that has made 1,500 round-trips in the year incurs an average operating cost of $600 per round-trip.
1. Using the high-low method, estimate the linear relationship y=a + bX, where y is the total annual operating cost of a helicopter and X is the number of round-trips it makes to JFK airport during the year.
2. Give examples of costs that would be included in a and in b?
3. If RamsayRamsay Travel expects each helicopter to make, onaverage, 1,200
round-trips in the coming year, what should its estimated operating budget for the helicopter fleet be?
Answer:
1) y = 337,500 + 375X
variable costs per trip (per helicopter) = $375 per trip
fixed costs = $337,500
2) fixed costs (a) include depreciation expenses, licences, insurance, etc., while variable costs include fuel, salaries (if pilots are paid per flight), etc.
3) operating budget for the whole fleet (12 helicopters) = $9,450,000
Explanation:
variable costs per trip (per helicopter) = ($900,000 - $675,000) / (1.500 - 900) = $225,000 / 600 = $375 per trip
fixed costs = $900,000 - (1,500 x $375) = $900,000 - $562,500 = $337,500
the estimated operating budget per helicopter = $337,500 + (1,200 x $375) = $337,500 + $450,000 = $787,500
operating budget for the whole fleet (12 helicopters) = 12 x $787,500 = $9,450,000
What do you notice about the payback period as the discount rate rises? Explain this relationship
Cash flow A B
Cost $8,000 $90,000
Cash flow year 1 $2,857 $9,000
Cash flow year 2 $2,857 $18,000
Cash flow year 3 $2,857 $27,000
Cash flow year 4 $2,857 $36,000
Cash flow year 5 $2,857 $13,500
Cash flow year 6 $2,857 $0
1. With a discount rate of 4%, the cash outflow for project A is:________.
2. Discount rate of 12%, the cash outflow for project B is:________.
3. Discount rate of 20%, the cash outflow for project B is:________.
4. As the discount rate increased, the discount payback perioud_______. The reason is that the future dollars are worth______in present value as the discount rate increases requiring______future dollars to recover the present value of the outlay.
Answer:
Payback Period as the discount rate rises1. With a discount rate of 4%, the cash outflow for project A is:__$8,000______.
2. Discount rate of 12%, the cash outflow for project B is:__$90,000______.
3. Discount rate of 20%, the cash outflow for project B is:__$90,000______.
4. As the discount rate increased, the discounted payback perioud__increased_____. The reason is that the future dollars are worth__less____in present value as the discount rate increases requiring__more____future dollars to recover the present value of the outlay.
Explanation:
a) Data and Calculations:
Cash flow A B Discount Discount
Factor at 12% PV Factor 20% PV
Cost $8,000 $90,000
Cash flow year 1 $2,857 $9,000 0.893 $8,037 0.833 $7,497
Cash flow year 2 $2,857 $18,000 0.797 14,346 0.694 12,492
Cash flow year 3 $2,857 $27,000 0.712 19,224 0.579 15,552
Cash flow year 4 $2,857 $36,000 0.636 22,896 0.482 17,352
Cash flow year 5 $2,857 $13,500 0.567 7,655 0.402 5,427
Cash flow year 6 $2,857 $0
PV at 4% 12% $72,158 20% $58,320
Annuity for Project A
= $14,976 ($2,857 x 5.242) at year 6
= $12,719 ($2,857 x 4.452) at year 5
= $10,371 ($2,857 x 3.630|) at year 4
= $7,928 ($2857 x 2.775) at year 3
Uber’s guidance that if a driver’s "rating over the most recent 100 trips is below a 4.6, your profile may be at risk of deactivation" represents which step in the control process?
Answer:
The step it represent is quality control in the control process. Uber management need to ensure that, the maximum quality of service is offered to its customers by their drivers hence the reason why such guidance rule is put in place.
Explanation:
"The Standard and Poor's 100 Index has closed at 575.12, up 2 points from the prior day's close. The holder of 5 "deep in the money" OEX Call contracts would have an approximate gain of:"
Answer:
$1,000
Explanation:
Multiplier = 100,
Points = 2
Number of contracts = 5
Then solving for the approximate gain;
We have the Index option contracts that have a multiplier of 100.
Therefore, a change of 2 points equals 100 x 2 = $200.00 per contract.
In that wise, this person is told to have 5 contracts, which then translates to the change in value, which is 5 x $200 = $1,000
Hence, the right answer is $1,000.
The coupon rate on an issue of debt is 8%. The yield to maturity on this issue is 10%. The corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds
Answer:
The after-tax cost of debt for a new issue of bonds is 6.9%
Explanation:
After tax cost of debt = Before tax cost * (1-tax rate)
After tax cost of debt = yield to maturity * (1-tax rate)
After tax cost of debt = 10%*(1-0.31)
After tax cost of debt = 10%*0.69
After tax cost of debt = 6.9%
1. One of the major changes resulting from managed care is the requirement of providers to assume accountability for: A. The treatment for the uninsured B. The appropriateness of interventions C. Individual treatment decisions D. The health status of defined populations
Answer:
The correct answer is B) The appropriateness of interventions
Explanation:
Managed care is evolving in many countries around the world.
One of the ways in which changes are becoming more prevalent is in the managed care industry is that due to competition, that players are beginning to take seriously the quality of health care being given to enrollees.
All of this is happening simultaneously with the bid to provide these services at the lowest cost possible with providers playing for marketing share.
In Managed care, if customers are treated fairly, they are most likely to return thus creating the possibility for sustained organic growth.
Cheers!
The improvement in the value of the objective function per unit increase in a right-hand side is the Group of answer choices g
The available options are:
a. sensitivity value.
b. dual price.
c. constraint coefficient.
d. slack value.
Answer:
Dual price
Explanation:
Dual price is term in business, which describes the measurement, amount or quantity per unit increase in the right-hand side of a constraint for a max problem. Dual price gives the extender of price a consumer should be ready to pay for additional units of a resource.
Hence, the improvement in the value of the objective function per unit increase in a right-hand side is the DUAL PRICE
Given the different perspectives of diverse groups regarding international trade, on what should national trade policy be based
Answer:
The vast majority of economic perspectives on international trade agree in that international agree is mutually benefitial for all countries. The reason is that international trade allows each country to specialize in the production of those goods and services for which they have a comparative advantage.
However, it is also true that from a social and political perspective, there are many more disagreements. For example, it is true that while international trade benefits most of the population as a whole, some sectors of the population are sometimes negatively affected by its effects.
For this reason, the approach to international trade should be: engage in trade with as many countries as possible, making sure that those groups who become disadvantaged by its effects are supported by a social safety net, and by training programs that can help them find other jobs.
When choosing between mutually exclusive projects, what is the best method to use?
a. The highest IRR is always the best option.
b. The lowest IRR is always the best option
c. The highest NPV is always the best option
d. The lowest NPV is always the best option
e. The lowest initial Investment is always the best option
Answer:
Option C. The highest NPV is always the best option.
Explanation:
The reason is that IRR assumes that the reinvestment rate is also at IRR which is not a realistic assumption. The Net Present Value resolves this as it assumes that the reinvestment rate is cost of capital and hence is more better than IRR to appraise the project.
The decision rule in the Net present value method is that the project which has higher positive Net present value is regarded as best project among two mutually exclusive projects.
For a company with a product mix of 40% of product A and 30% each of products B and C, which of the following mixed-model sequences best reflects the lean philosophy?
A. BBAACCABBC.
B. AAABBCCCBB.
C. BBBBAAACCC.
D. ACBACABCAB.
E. BACBACBACB.
Answer:
E. BACBACBACB
Explanation:
The lean philosophy was originated from manufacturing practices but has grown to cover all aspects of an organization. The philosophy discourages waste by encouraging efficiency which is directed at continuous improvement for the goal of creating value for the customer. In the example above, applying lean philosophy, we would pick the last option since this reduces waste of inventory by making sure that the product with the highest demand comes first; therefore we sequence as per demand rate under lean philosophy to reduce waste and increase efficiency.
On January 1, 2018, an investor paid $303,000 for bonds with a face amount of $330,000. The stated rate of interest is 11% while the current market rate of interest is 13%. Using the effective interest method, how much interest income is recognized by the investor in 2018 (assume annual interest payments and amortization)
Answer:
$39,791.7
Explanation:
Calculation of how much interest income is recognized by the investor in 2017
Using this formula
Interest income=Bonds amount+(Bonds amount *Current market rate of interest)-(Face amount*Contract rate of interest)*Current market rate of interest
Let plug in the formula
Interest amount=$303,000+($303,000*13%)-($330,000*11%)*13%
Interest amount=$303,000+($39,390)-($36,300)*13%
Interest amount=($342,390-$36,300)*13%
Interest amount =$306,090*13%
Interest amount =$39,791.7
Therefore the amount of interest income recognized by the investor in 2017 will be $39,791.7
A 10-year bond paying 8% annual coupons pays $1000 at maturity. If the required rate of return on the bond is 7%, then today the bond will sell (rounded to the nearest cent) for
Answer:
Bond Price = $1070.235815 rounded off to $1070.24
Explanation:
To calculate the price of the bond today, we will use the formula for the price of the bond. We assume that the interest rate provided is stated in annual terms. As the bond is an annual bond, the coupon payment, number of periods and annual YTM will be,
Coupon Payment (C) = 1000 * 0.08 = 80
Total periods (n)= 10
r or YTM = 7%
The formula to calculate the price of the bonds today is attached.
Bond Price = 80 * [( 1 - (1+0.07)^-10) / 0.07] + 1000 / (1+0.07)^10
Bond Price = $1070.235815 rounded off to $1070.24
Most products in the marketplace are in the ________ stage of the product life cycle.
a) growth
b) development
c) decline
d) maturity
e) introduction
Answer:
D. Maturity stage
Explanation:
Most products in the marketplace are in the maturity stage of the product life cycle.
There are four stages in the product life cycle:
1. Introduction stage: This is the stage where awareness is created about a new product in the market. Consumers are made to the aware of a new product by advertisement and marketing.
2. Growth: After awareness has been created for the product, there is an increase in firms expansion and demand.
3. Maturity: This is a stage where firms realise more profits due to
reduction in cost of production and marketing.
4. Decline: When the firm start making more peofits, other firms will join the industry leading to competition. This may lead to the product declining if it can't compete in the industry.
An investor bought a 30-year coupon-paying bond on January 1st, 2017. The bond pays a coupon C at the end of each calendar year. By January 1st, 2018 interest rates have increased at all maturities. The Holding Period Return of this investment from 1/1/2017 to 1/1/2018 must have been negative.
a) true
b) false
Answer:
b) false
Explanation:
lets assume that the investor purchased a 30 year coupon at par ($1,000) on January 1, 2017. The bond pays a coupon of C, and the market rate = c (bond purchased at par).
BY January 1, 2018, market interest rate = C + X, that means that the bond's market value has decreased to $1,000 - Y.
holding period return = [coupon + (ending value - initial value)] / initial value
holding period return = [C + ($1,000 - Y - $1,000)] / $1,000 = (C - Y) / $1,000
if C ˃ Y, then the holding period return is positiveif C < Y, then the holding period return is negativeif C = Y, then the holding period return is zeroTRV is expecting to purchase a new manufacturing line. It is expected to cost 119,000 and will require an additional 12,000 to set-up. It will generate $25,000 annually for the next 5 years. What is the modified internal rate of return if the cost of capital is 12% and the expected rate on reinvestments is equal to 8%?
Answer:
2.28%
Explanation:
initial outlay = $119,000 + $12,000 = $131,000
cash flows 1 - 5 = $25,000
Re = 12%
rate of reinvestments = 8%
using a financial calculator, the MIRR = 2.28%
if you want to calculate MIRR manually, you must solve the following:
MIRR = ⁿ√(future value of cash flows at reinvested rate / present value of negative values discounted at financing rate) - 1
n = 5future value of cash flows at reinvested rate = $25,000 x 5.8666 (FV annuity factor) = $146,665present value of negative cash flows = $131,000MIRR = ⁵√($146,665 / $131,000) - 1 = 1.0228 - 1 = 0.0228 = 2.28%
Faisal has $ 15 comma 000 in his savings account and can save an additional $ 4 comma 500 per year. If interest rates are 12%, how long will it take his savings to grow to $ 50 comma 000 ?
Answer:
It will take 4 years 6 months.
Explanation:
Required here is the period, n for an investment to grow to $50,000 and this is calculated as follows :
Pv = - $15,000
Pmt = - $4,500
P/yr = 1
r = 12 %
Fv = $50,000
n = ?
Using a Financial Calculator, the period, n for an investment to grow to $50,000 is 4.50 or 4 years 6 months.
To manufacture protective cases and keep its operations running smoothly, Connie’s Case Creations makes purchases from a number of suppliers. Using the drop down menu, match the description of each purchase with the corresponding business-product classification.
Purchase of large-scale machinery to mold each case.
Purchase of cleaning fluids for maintaining manufacturing equipment.
Purchase of accounting services for tax preparation.
Purchase of bulk plastics to be molded into cases.
Purchase of multifunction laser printers for office use.
Purchase of leather straps to be fastened to finished cases.
Purchase of plastic glues to attach decorations to finished cases.
Answer:
Purchase of large-scale machinery to mold each case.- Major EquipmentMajor equipment are large scale type assets.
Purchase of cleaning fluids for maintaining manufacturing equipment - SupplySupply goods are bought to enable the company maintain their equipment.
Purchase of accounting services for tax preparation - Business ServiceThey are services purchased to maintain the business.
Purchase of bulk plastics to be molded into cases - Raw MaterialsThese are the commodity goods that will be used to make finished products.
Purchase of multifunction laser printers for office use - Accessory EquipmentAccessory equipment are light in nature but are still needed to help in the operations of the business.
Purchase of leather straps to be fastened to finished cases - Component PartPurchase of plastic glues to attach decorations to finished cases - Process MaterialThese are products that will be used in the production process.
Which of the following statements is true with regard to the reimbursement of employee business expenses?
a. Excess reimbursements of ordinary and necessary expenses are never subject to withholding.
b. Provided that reimbursements are received by an employee under a plan which requires the employee to substantiate the expenses to his employer, the amounts are excluded from the definition of wages subject to withholding, without regard to whether the employee actually substantiates the expenditures.
c. Reimbursements of ordinary and necessary expenses are subject to federal income tax withholding.
d. Reimbursements received by an employee under a plan which contains a requirement to return excess amounts, and the employee does so on a timely basis, are excluded from the definition of wages subject to withholding.
e. All of these choices are true.
Answer: All ofthe choices are true
Explanation:
It should be noted that the reimbursements of ordinary and necessary expenses are subject to federal income tax withholding. Also, excess reimbursements of ordinary and necessary expenses are never subject to withholding.
Lastly, the reimbursements that is received by an employee under a plan which contains a requirement to return excess amounts, and the employee does so on a timely basis, are excluded from the definition of wages subject to withholding.
Therefore, all the options are correct.
The management of Kabanuck Corporation is considering dropping product V41B. Data from the company's accounting system appear below: Sales $933,000 Variable expenses $410,500 Fixed manufacturing expenses $522,500 Fixed selling and administrative expenses $347,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $212,500 of the fixed manufacturing expenses and $123,500 of the fixed selling and administrative expenses are avoidable if product V41B is discontinued. What would be the effect on the company's overall net operating income if product V41B were dropped
Answer:
$186,500 decrease
Explanation:
The computation of the effect in case when the product V41B is dropped is shown below:
We need to compare the cost between the current profits and the fixed cost incurred which is
Current profits = Sales - Variable costs - Fixed manufacturing expenses - Fixed selling and administrative expenses
= $933,000 - $410,500 - $522,500 - $347,000
= ($347,000)
Now fixed costs incurred is
= ($522,500 - $212,500) + ($347,000 - $123,500)
= $310,000 + $223,500
= $533,500
Since the fixed cost is more than the current profits, so the net operating income would be decreased by
= $533,500 - $347,000
= $186,500
Write a three-paragraph essay describing the value and benefits of using a balanced scorecard for management control. Compare and contrast the BSC approach to financial controls. Do you agree with Dana that the BSC approach is better than using financial controls alone
Answer:
The Balanced Scorecard for Management Control
Dana's company can deploy the Balanced Scorecard as a strategic management control approach which views organizational performance from four broad perspectives that are all-embracing. These perspectives include the Financial Perspective, the Customer Perspective, the Internal Business-Process Perspective, and the Learning and Growth Perspective. The aim is to ensure that control is not just about one aspect of the organization, but the whole, and a balance is struck by paying equal attention to the elements that make up an organization.
According to a well-known adage, "what you measure is what you get." The BSC approach strategically and holistically measures an organization's performance by identifying all the factors that cause improved organizational outcomes. Therefore, the benefits of using a balanced scorecard include improved internal capacity created by a focus on improving an organization's learning and growth through the Learning and Growth perspective. This cascades to improved internal processes which result from the internal perspective. With improved processes, customers and other stakeholders derive better and maximum satisfaction from the organization. This does not end here. Satisfied customers cause improved financial results, which are distributed to an organization's stakeholders, including the government in form of taxation, dividends for stockholders, and better pay for employees, etc. These stakeholders in turn try to add value to the organization with better processes and operations, improved financing, and business opportunities.
Looking at the value package of BSC, I agree with Dana that the BSC approach is better than using only financial controls alone. While financial controls are at the very core of resource management and operational efficiency in any organization, they do not represent the whole picture of management control. They are the endgames and not the starting strategies for a winning organization.
Explanation:
The Balanced Scorecard (BSC) utilizes a 360 degree approach to achieve effective control of resources toward attaining goals by viewing organizational performance from four broad perspectives, which cover all aspects of any organization. The four perspectives that BSC uses are the Financial Perspective, the Customer Perspective, the Internal Business- Process Perspective, and the Learning and Growth Perspective. By approaching performance evaluation and management with these perspectives, the Balanced Scorecard is able to achieve all-round management control because no aspect of the organization is left behind.
Which of the following is most likely to be categorized as a work team?
A. A team that oversees the functioning of all the teams in an organization and coordinates activities between teams
B. A team comprising interior designers, architects, and builders involved in designing and creating the layout of a new hotel
C. A quality control team at a factory which oversees the quality of products and recommends changes in production techniques
D. A band travelling around the country playing shows at different venues for six months
E. A group of four workers making a specific part on the production line of an automobile factory
Answer:
E.
Explanation:
Work teams are defined as being groups of employees that work together on a specific task, which is usually added to the tasks of other work groups to create something that benefits the company. Therefore the most likely scenario that would be categorized as a work team would be a group of four workers making a specific part on the production line of an automobile factory. This is because it describes more than two employees working to complete a specific task for the company.
Suppose you invested $58 in the Ishares Dividend Stock Fund (DVY) a month ago. It paid a dividend of $0.65 today and then you sold it for $68. What was your return on the investment?
Answer:
18.36%
Explanation:
Calculation for the return on the investment?
Using this formula
Return on investment = Net profit/Cost of Investment
The first step is to find the net profit using this formula
Net profit =( Sales amount +Dividend)-Dividend Stock Fund Investment
Let plug in the formula
Net profit = ($68 + $0.65) - $58 =
Net profit= $68.65-$58
Net profit= $10.65
Now let calculate the return on investment
Using this formula
Return on investment = Net profit/Cost of Investment
Let plug in the formula
Return on investment=$10.65/58
Return on investment= 18.36%
Therefore the return on the investment will be 18.36%
The income inequality ratios in England and in Guatemala are roughly the same. What can explain this finding
Answer:
This finding is explained by the fact that ratios express relationships between variables not in absolute terms but in relative terms. The variables used for calculating the income inequality ratio in England takes into consideration the level of income distribution and the population. These may not be equal to the level of income distribution and the population of Guatemala. For instance, if England's income inequality ratio is 10% and Guatemala's is also 10%, it does not mean that they have the same amount of population and income distribution. Each ratio is expressed in relation to its related variable. England's variables cannot be used to express Guatemala's.
Explanation:
To measure inequality ratios for England and Guatemala one divides the standard deviation of the income distribution of England and Guatemala respectively by their means. These are separate indices in value terms.
Suppose we have the following scenario:
Multiplier: 1.7
Tax Rate: 20%
Increase in spending: $300
Billion Total Deficit in the previous year: $1 Trillion
Based on the information provided what is the deficit that arises from the increase in spending from the government?
a. $510 billion.
b. $300 billion.
c. $198 billion.
d. $188 billion.
Answer:
b. $300 billion.
Explanation:
Data provided in the question
Multiplier = 1.7
Tax rate = 20%
Increase in spending = $300
Total deficit = $1 trillion
Based on the above information, the deficit that arises from the increase in spending should be $300 billion as it is financed by the government that results in budget deficit
Hence, the correct option is B. $300 billion
Which of the following is not one of the key characteristics required in order for money to be an acceptable medium of exchange?
a) profitability;
b) durability;
c) divisibility;
d) portability;
e) scarcity
Answer:
a) profitability;
Explanation:
The key characteristics required for accepting the money as a medium of exchange includes durability, divisibility, portability, scarcity only
It does not involved the profitability as it is concerned with the profits only and thus not relevant for the acceptable medium of exchange
Therefore in the given case, the option a is correct
Which of the following is not a trademark format?
O generic mark
O design mark
O standard character mark
O sound mark
OPTION D) IS THE RIGHT ANSWER. SOUND MARK.
Explanation:
IN SOUND IT NOT GIVE ANY MARKS. BECAUSE SOUND IT MEANS ONE PERSON SAY SOMETHING IT COMES ONE VOLUMES. IT'S GIVE SOME SOUNDS. SO WE DON'T MARK AS SOUND.
HOPE IT HELP.....❤❤Answer:
please mark my answer brainliest
Explanation:
in short sound mark that's all
George's Hamburgers issued 5â%, â10-year bonds payable at 85 on Decemberâ 31, 2016. At Decemberâ 31, 2018, George reported the bonds payable asâ follows:
Long-term Liabilities:
Bonds Payable $300,000
Less: Discount on Bonds Payable 36,000 $264,000
George's pays semiannual interest each June 30 and December 31.â(Assume bonds payable are amortized using theâ straight-line amortizationâ method.)
Requirement 1. Answer the following questions about
George's bondsâ payable:
a. What is the maturity value of theâbonds?â____
b. What is the carrying amount of the bonds at Decemberâ 31, 2018â?
____
c. What is the semiannual cash interest payment on theâ bonds?
â_____
d. How much interest expense should the company record eachâ year?
â_____
Requirement 2. Record the Juneâ 30, 2018â, semiannual interest payment and amortization of the discount.â(Record debitsâ first, then credits. Select the explanation on the last line of the journal entryâ table.)
Answer:
1. The maturity value is $300,000
2. The carrying amount of the bonds is at December 31, 2018 is $264,000
3. Semiannual cash interest payment on the bond = $300,000 * 5% * 1/2 = $7,500
4. Discount on BP = $300,000 * 15% = $45,000
Straight line method amortization = $45,000 / ( 10*2 = 20) = $2,250
Interest Expenses = $7,500 + $2,250 = $9,750
Journal Entry Debit Credit
Interest Expenses $9,750
Discount on Bond Payable $2,250
Cash $7,500
Which common method for classifying accounts is growing in popularity because it is flexible and incorporates multiple variables
Answer: portfolio analysis
Explanation:
Portfolio Analysis is a situation whereby a portfolio asset allocation thst already exist is being reviewed and evaluated in order to ascertain if the current allocation will be able to
meet up with the financial goals of the investor.
It is the common method for classifying accounts is growing in popularity because it is flexible and incorporates multiple variables.
grwoth is the key to better consumption possibilities and one key to better consumption possibilities is
Answer:
Trade
Explanation:
The consumption possibility can be gotten from three different factors, it could be gotten from opportunity for trade, production set and also from consumption behavior.
Involving in trade would reduce the prices of goods for consumers, especially in a country that is involved in importation. It creates gains for consumers. Therefore it can be said that trade is a key to better consumption possibilities.
Assuming an acid-test ratio of 1.0, how will the purchase of inventory with cash affect the ratio?
A) Could either increase or decrease the acid-test ratio.
B) No change to the acid-test ratio.
C) Decrease the acid-test ratio.
D) Increase the acid-test ratio.
Answer:
C) Decrease the acid-test ratio
Explanation:
The quick ratio is also called acid test ratio. It is a liquidity ratio that measures level of liquid assets of a business.
That is the amount of cash or near cash assets it has to settle it's current debt.
Mathematically
Quick ratio = (Current assets - Inventory) ÷ Current liabilities
If cash (current asset) is used to buy Inventory. Cash will reduce and inventory will increase.
The value of (Current asset - Inventory) reduces.
As the numerator in the ratio reduces, the quick ratio also reduces.