The Salem Corporation has current assets of $3.0 million. Of this total, $1.0 million is inventory, $0.5 million is cash, $1.0 million is accounts receivable, and the balance is marketable securities. Salem has $1.5 million in current liabilities.

What are the current and the quick ratios for Salem?

If Salem takes $0.25 million in cash and pays off $0.25 million of current liabilities, what happens to its current and quick ratios? What happens to its real liquidity?

If Salem sells $0.5 million of its accounts receivable to a bank and uses the proceeds to pay off short-term debt obligations, what happens to its current and quick ratios?

If Salem sells $1.0 million in new stock and places the proceeds in marketable securities, what happens to its current and quick ratios?

What do these examples illustrate about the current and quick ratios?