A) Current Ratio: What effect would the following actions have on a firms current ratio? Assume that net working capital is positive.

Inventory is purchased.

A supplier is paid.

A short-term bank loan is repaid.

A long-term debt is paid off early.

A customer pays off a credit account.

Inventory is sold at cost.

Inventory is sold for a profit.

B) Current Ratio and Quick Ratio: In recent years, Dixie Co. has greatly increased its current ratio. At the same time, the quick ratio has fallen. What has happened? Has the liquidity of the company improved?