Business, 26.10.2020 17:20 hi105

Knowledge Check 01 Holding all else constant, a decrease in cash will decrease the acid-test ratio. True or False True False

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Answer from: alex9473

Based on the way the acid-test ratio is calculated, when there is a decrease in cash, it is TRUE that the acid-test ratio will decrease.

The acid-test ratio is calculated as:

= (Current Assets - Inventory) / Current liabilities

Cash is a current liability which means that if it decreases, the numerator will decrease whilst the denominator will remain the same.

This will lead to the result being less. For instance, assume the (Current Assets - Inventory) reduced from $10 to $6 and the Current liabilities were $4, the acid test ratio would be:

Acid-test ratio before reduction: Acid - test ratio after reduction:

= 10 / 4 = 6 / 4

= 2.5 = 1.5

In conclusion, a reduction in cash reduces acid-test ratio.

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Answer from: DisneyGirl11

True

Explanation:

The acid-test ratio also referred to as the quick ratio is used to compare the short-term assets for a particular company to the short-term liabilities so as to know if the short-term debt can be settled quickly based on the available cash.

Holding all else constant, it should be noted that a reduction in cash will also lead to a reduction in acid-test ratio. We should note that when cash or any other short term investment reduces, there'll also be a reduction in the acid test ratio.

Therefore, the answer is True.

Answer from: Quest

The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (gdp) and other macroeconomic variables. a business cycle is typically characterized by four phases—recession, recovery, growth, and decline—that repeat themselves over time. economists note, however, that complete business cycles vary in length. the duration of business cycles can be anywhere from about two to twelve years, with most cycles averaging six years in length. some business analysts use the business cycle model and terminology to study and explain fluctuations in business inventory and other individual elements of corporate operations. but the term "business cycle" is still primarily associated with larger (industry-wide, regional, national, or even international) business trends.

Answer from: Quest

y=mx+b is the right slope of velocity carry the 4 over

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Knowledge Check 01 Holding all else constant, a decrease in cash will decrease the acid-test ratio....