If current assets exceed current liabilities, the payment of creditors will:
A) increase the current ratio.
B) decrease the current ratio.
C) increase the level of cash held.
D) do none of the above.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. If current assets exceed current liabilities, this will increase the numerator and therefore increase the current ratio.

If Current Assets Exceed Current Liabilities, the Payment of Creditors