Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how will the purchase of inventory with cash affect each ratio?
A. Increase the current ratio and increase the acid-test ratio.
B. Decrease the current ratio and increase the acid-test ratio.
C. No change to the current ratio and decrease the acid-test ratio.
D. Decrease the current ratio and decrease the acid-test ratio.
Answer: C
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