Bicksler Corporation has a current ratio of 2.0 on 21st July. On 22nd July, Bicksler purchased (and received) raw materials on credit from its supplier. Assuming all other things are equal, how will this transaction affect the current ratio of Bicksler?
A) The current ratio will increase.
B) The current ratio will decrease.
C) The current ratio will become equal to its quick ratio.
D) The quick ratio will become more than its current ratio.
E) The current ratio will remain the same.

Question

Quizplus · Accepted Answer

Purchasing raw materials on credit increases current liabilities without affecting current assets, thus decreasing the current ratio.

Bicksler Corporation Has a Current Ratio of 2