Comparing this year's results to last year's,Hector discovered that his firm's current ratio improved from 1.5 to 2.0.What has happened?
A)Current liabilities have decreased.
B)Fixed assets have increased.
C)Ownership equity has increased.
D)Long-term debt has decreased.

Question

Quizplus · Accepted Answer

The current ratio is a measure of a company's ability to meet its short-term debt obligations. An increase in the current ratio means that the company's current assets have increased relative to its current liabilities. Therefore, option A is the best choice as it suggests that current liabilities have decreased, resulting in a higher current ratio. Option B is unlikely to affect the current ratio, and option C and D would result in an increase in the company's total equity or a decrease in its long-term debt, influencing ratios that measure solvency, but not the current ratio.

Comparing This Year's Results to Last Year's,Hector Discovered That His