As of December 31, 2012, Grove Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $18,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. On January 1, 2012, Grove paid $3,600 on accounts payable. Which of the following statements is incorrect?
A)Grove's current ratio will increase.
B)Grove's quick ratio will increase.
C)Grove's working capital will not change.
D)Grove's quick ratio will increase and its current ratio will decrease.

Question

Quizplus · Accepted Answer

The transaction will decrease current assets (cash) and decrease current liabilities. This will cause the current and quick ratios to increase. Since both current assets and current liabilities are both decreased by the same amount, working capital will not change.

As of December 31, 2012, Grove Corporation Had a Current