A company's current ratio is 1.5. If the company uses cash to retire notes payable due within one year, would this transaction increase or decrease the current ratio and return on assets ratio?

Question

Quizplus · Accepted Answer

Retiring notes payable due within one year using cash will decrease current liabilities, thus increasing the current ratio. This transaction does not affect the assets, so the return on assets ratio would not be affected. Therefore, the best choice is A.

A Company's Current Ratio Is 1