If the current ratio increases from one year to the next,it does not necessarily follow that the amount of working capital will also increase.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities, and an increase in current assets or a decrease in current liabilities would increase the current ratio. However, working capital is calculated by subtracting current liabilities from current assets, so a change in either one could affect working capital. Therefore, an increase in the current ratio does not necessarily mean that working capital will also increase.

If the Current Ratio Increases from One Year to the Next,it