Which of the following could explain a substantial increase in the current ratio (presently 1:1)?
A) Purchase of inventory for cash
B) Sale of a major noncurrent asset near year-end
C) A large prepayment near year-end
D) Received a cash deposit for work to be done next year

Question

Quizplus · Accepted Answer

Selling a noncurrent asset increases cash (a current asset) without affecting current liabilities, thus increasing the current ratio.

Which of the Following Could Explain a Substantial Increase in the Current