Comparing this year's results to last year's, Thabo discovered that his business's current ratio improved from 1.5 to 2.0.What has happened?
A)Current liabilities have decreased.
B)Non-current assets have increased.
C)Equity has increased.
D)Non-current liabilities decreased.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. If the ratio has improved, it means that either current assets have increased or current liabilities have decreased. Since there is no option for current assets increasing, the answer must be that current liabilities have decreased.

Comparing This Year's Results to Last Year's, Thabo Discovered That