All else being equal, which of the following will decrease a firm's current ratio?
A) A decrease in the net fixed assets
B) A decrease in depreciation expense
C) An increase in accounts payable
D) None of the above

Question

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. Therefore, any increase in current liabilities will decrease the current ratio. Accounts payable are a type of current liability, so an increase in accounts payable will decrease the current ratio. A decrease in net fixed assets or depreciation expense will not have a direct impact on the current ratio, as they are not components of current assets or current liabilities.

All Else Being Equal, Which of the Following Will Decrease