A company's Quick Ratio (Acid Test) has steadily increased over the last three years, while its Inventory Turnover Period has also steadily increased. What is the most plausible interpretation of this combined trend?

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Accounting · Ratio Analysis

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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The company's liquidity is improving, but its operational efficiency in inventory management is deteriorating

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The company has an increasing risk of immediate default due to excessive liquid assets

Answer 2

The company's liquidity is improving, but its operational efficiency in inventory management is deteriorating

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The company is improving its liquidity and operational efficiency simultaneously

Answer 4

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