As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $29,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. On January 1, Year 2 Gant paid $3,600 on accounts payable. Which of the following statements is not true?
A)Gant's quick ratio will increase and its current ratio will decrease.
B)Gant's quick ratio will increase.
C)Gant's working capital will remain the same.
D)Gant's current ratio will increase.

Question

Quizplus · Accepted Answer

Paying off accounts payable reduces current liabilities, which increases both the current and quick ratios. Working capital remains the same because both current assets and current liabilities decrease by the same amount.

As of December 31, Year 1, Gant Corporation Had a Current