If a company used some cash and a long-term loan to buy land and a building, what would be the effect on the company's current ratio and debt-to-equity ratio?
$\begin{array}{ll}
&\text { Current } & \text { Debt-to-Equity } \
&\text { Ratio } & \text { Ratio } \
A.&\text { increase } & \text { increase } \
B.&\text { increase } & \text { decrease } \
C.&\text { decrease } & \text { increase } \
D.&\text { decrease } & \text { decrease }
\end{array}$
A)Option A
B)Option B
C)Option C
D)Option D

Question

If a company used some cash and a long-term loan to buy land and a building, what would be the effect on the company's current ratio and debt-to-equity ratio? 
$\begin{array}{ll}
&\text { Current } & \text { Debt-to-Equity } \
&\text { Ratio } & \text { Ratio } \
A.&\text { increase } & \text { increase } \
B.&\text { increase } & \text { decrease } \
C.&\text { decrease } & \text { increase } \
D.&\text { decrease } & \text { decrease }
\end{array}$
A)Option A
B)Option B
C)Option C
D)Option D

Quizplus · Accepted Answer

Using cash decreases current assets, which lowers the current ratio. Taking on a long-term loan increases total debt, raising the debt-to-equity ratio.

If a Company Used Some Cash and a Long-Term Loan