If a firm's current ratio exceeds 1.0, what happens as a result of paying cash to reduce accounts payable?

Name: If a firm's current ratio exceeds 1.0, what happens as a result of paying cash to reduce accounts payable?
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Question

Quizplus · Accepted Answer

Paying cash to reduce accounts payable decreases both current assets and current liabilities by the same amount, but since the current ratio is above 1.0, the reduction in liabilities has a greater proportional effect, increasing the current ratio.

If a Firm's Current Ratio Exceeds 1