Purchase of goods for cash-

The correct answer is: D. Will not affect the current ratio.

The current ratio is a measure of a company’s liquidity, or its ability to pay its short-term debts. It is calculated by dividing a company’s current assets by its current liabilities.

Purchase of goods for cash will increase a company’s current assets, but it will also increase its current liabilities by the same amount. Therefore, the current ratio will not be affected.

Here is a brief explanation of each option:

• Option A: Purchase of goods for cash will increase the gross profit percentage. This is not correct because the gross profit percentage is calculated by dividing a company’s gross profit by its sales. Purchase of goods for cash will not affect a company’s sales or its gross profit.
• Option B: Purchase of goods for cash will decrease the current ratio. This is not correct because, as explained above, purchase of goods for cash will not affect the current ratio.
• Option C: Purchase of goods for cash will increase the current ratio. This is not correct because, as explained above, purchase of goods for cash will not affect the current ratio.
• Option D: Purchase of goods for cash will not affect the current ratio. This is the correct answer because, as explained above, purchase of goods for cash will increase a company’s current assets by the same amount that it increases its current liabilities.