Grayille Financial Consultants, Inc. is planning to reduce the number of days it
ID: 2683019 • Letter: G
Question
Grayille Financial Consultants, Inc. is planning to reduce the number of days it allows its clients to pay their bills from 45 days to 30 days. Grayille believes that this policy change will have no effect on either sales or costs. Any asset changes resulting from this new policy will be offset by a corresponding and equal change in equity. All else constant, this new collection policy should be expected to (circle all that apply - if the correct answer is a and b and you circle any letter(s) other than a and b, you will receive no credit - that is, no partial credit will be awarded for your answer to this question):a. Lower the firm's inventory turnover ratio.
b. Increase the firm's average collection period.
c. Lower the firm's quick ratio.
d. Lower the firm's current ratio.
e. Increase the firm's debt ratio.
Explanation / Answer
c. Lower the firm's quick ratio.
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