Using cash to purchase inventories will increase a company's quick ratio and reduce its current ratio?

The answer to your question is NO, it does not.


EXAMPLE:

Current Ratio
= Current Assets / Current Liabilities
= 100 / 50
= 2:1

Quick Ratio
= (Current Assets-Inventory) / Current Liabilities
= (100-20) / 50
= 80 / 50
= 1.6:1

JE:
Dr. Inventory 10
Cr. Cash 10

1 CA up, 1 CA down.

Therefore, CURRENT RATIO STAYS THE SAME.

Quick Ratio
= (100-30) / 50
= 1.4:1

Therefore quick ratio goes DOWN