Borrowing more cash is a long term solution for a company needing cash to pay employees. The term Accounts Receivable, Net means that the allowance for uncollectible accounts has been subtracted. 5. 6. 7. A purchase of prepaid insurance policy with cash will have no effect on the quick ratio 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. The sale of inventory to a customer for more than the cost will increase the current ratio. A company can never be too liquid. The quick ratio is always higher than the current ratio. To calculate average accounts receivable for 2020, the Accounts Receivable amounts for 2019 and for 2020 are used. When inventory turnover goes up, days sales in inventory goes down. The longer it takes to sell inventory the better for a company. One number used for calculating the net profit margin is the same as for calculating return on investment/assets. Gross profit will always be higher than net profit before taxes. Cost of goods sold is not used in the calculation of any of the profitability ratios. Profitability ratios are never shown as percentages.