If Foster Toys has a current ratio of 2.5 and working capital of $2,200,000, which of the following will cause both the current ratio and working capital to decrease?
A) Paid accounts payable in the amount of $60,000
B) Recorded unpaid salaries in the amount of $160,000
C) Borrowed $200,000 from a bank to be repaid in 90-days
D) Purchased $30,000 of inventory on credit

Question

Quizplus · Accepted Answer

Working capital will remain the same in A, C, and D. Only option B will show a decrease in both the current ratio and working capital.

If Foster Toys Has a Current Ratio of 2