If a contingent loss which is expected to be paid next year is accrued, this would:
A)decrease the debt/equity ratio.
B)decrease the debt/asset ratio.
C)decrease the current ratio.
D)have no effect on the quick ratio.

Question

Quizplus · Accepted Answer

Accruing a contingent loss would increase current liabilities and decrease current assets, resulting in a decrease in the current ratio. It would have no effect on debt/equity ratio or debt/asset ratio as it is not related to debt. It would also have no effect on the quick ratio as it does not impact the liquid assets used in the calculation of the quick ratio.

If a Contingent Loss Which Is Expected to Be Paid