A company has current assets of $200,000 and current liabilities of $150,000.If they used cash to pay off some accounts payable, what would the effect be on their current ratio?
A)The current ratio would increase.
B)The current ratio would decrease.
C)The current ratio would stay the same.
D)The effect on the current ratio would depend on the amount paid.

Question

Quizplus · Accepted Answer

Paying off accounts payable with cash would decrease current liabilities, which would increase the current ratio (current assets divided by current liabilities).

A Company Has Current Assets of $200,000 and Current Liabilities