Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 5 - Balance Sheet and Statement of Cash Flows - Questions - Page 279: 5

Answer

An increase in inventories is an increase in current assets, which is the numerator of the current ratio, therefore reflecting increased liquidity.

Work Step by Step

Generally, an increase in the current ratio indicates that the organization has attained better liquidity.
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