Sure, let's analyze each transaction to understand their impact on the Quick Ratio, which is a measure of a company's ability to meet its short-term obligations with its most liquid assets.
### Understanding Quick Ratio:
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Initially, the Quick Ratio is given to be 1:1. This means the Current Assets excluding Inventory are equal to Current Liabilities.
### Impact of each transaction:
1. Purchase of inventory ₹1,50,000 through cheque:
- This transaction will decrease cash (a quick asset).
- The new inventory will not affect the quick ratio since inventory is not included in quick assets.
- As cash decreases and current liabilities remain the same, the Quick Ratio will decrease.
2. Sold inventory on credit ₹50,000:
- This transaction converts inventory, which is not a quick asset, into accounts receivable (a quick asset).
- This increases the quick assets without affecting current liabilities.
- Hence, this will increase the Quick Ratio.
3. Outstanding expenses of ₹40,000 paid:
- Payment of outstanding expenses will decrease cash (a quick asset) and decrease current liabilities by the same amount.
- Both quick assets and current liabilities decrease equally, so the Quick Ratio remains unchanged.
4. Machinery purchased for cash ₹50,000:
- This transaction decreases cash (a quick asset) and increases fixed assets, which are not quick assets.
- As cash decreases and current liabilities remain the same, the Quick Ratio will decrease.
### Conclusion:
Among the given transactions, only the second transaction (Sold inventory on credit ₹50,000) will result in an increase in the Quick Ratio.
Thus, the correct choice is:
(B) Sold inventory on credit ₹50,000
