How do working capital (WC) and the quick ratio (QR) change when stock is purchased?

Answer 1

If you are buying back your own stock, then both ratios will fall -- because you are decreasing current assets and also decreasing Shareholder Equity.

If you are buying another company's stock, then it depends on whether the new stock goes into current assets or noncurrent assets. If the former, then there is no change. If the latter, then both ratios drop.

All this assumes that you ar ebuying with cash. If you are borrowing to buy the stock, then the answer changes if current liabilities changes.

Answer 2

If you buy stock for cash, working capital will stay the same becuase stock and cash both form part of working capital and the stock will go up by an amount equal to the cash spent.

If you buy on credit the double entry is debit stock and credit creditors. Once again working capital stays the same.

The Quick Ratio is current assets over current liabilities. This remains unchanged in the case of a cash purchase or credit purchase