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Books Forever, Inc., use short-term bank debt to buy inventory. Assuming an initial current ratio that is greater than 1, and an initial quick (or

Books Forever, Inc., use short-term bank debt to buy inventory. Assuming an initial current ratio that is greater than 1, and an initial quick (or acid ratio) that is less than 1, what is the effect of these transactions on the current ratio and the quick ratio?

Both ratios will decrease. Neither ratio will decrease. Only one ratio will decrease.

the correct answer:

Both ratios will decrease.

Explain why.

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