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There is no reason to believe that a company's current or quick ratio would change if it purchased some inventory on credit as opposed to cash, so this statement is untrue.
What is meant by quick ratio?
The quick ratio gauges a company's ability to cover its short-term obligations without having to sell goods or seek for further funding. The fast ratio is viewed as a more cautious indicator than the current ratio, that counts only current assets for coverage for current liabilities. A company's ability to meet its short-term obligations with its most liquid assets is evaluated using the quick ratio, which also acts as a measure of the company's short-term liquidity position.
What causes quick ratio to increase?
The following are three of the most popular techniques to raise the quick ratio: Boost revenue and inventory turnover: Discounting, more marketing, and staff incentives can all be utilized to boost sales, which will then enhance inventory turnover. A corporation has enough cash and cash equivalents to repay any debt payments that might become due in the next year or so if its quick ratio is high (any quick ratio over 1).
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