Question

Which of the following would indicate an improvement in a company's financial position, holding other things constant? The current and quick ratios both increase. The inventory and total assets turnover ratios both decline. The debt ratio increases. The profit margin declines.

Answer 1

Answer:

The current and quick ratios both increase.

Explanation:

As we know that

The current and the quick ratio represents the liquidity position of the company whether the company is able to pay its short term obligations or debt for the twelve months or not

It can be check by determining the current ratio and the quick ratio which is

Current ratio = Current assets ÷ current liabilities

And, the quick ratio is

Quick ratio = (Current assets - inventory) ÷ current liabilities

It is always expressed in the times

So for improving the financial position we have to indicate the current and quick ratio