How will a company's current ratio be affected when the company receives $20,000 from owners and issues common stock to them?
A)The current ratio will increase because current assets increase.
B)The current ratio will increase because current liabilities decrease.
C)There will be no change in the company's current ratio.
D)The current ratio will decrease because current liabilities increase.

Question

Quizplus · Accepted Answer

The transaction will increase Cash,a current asset,and increase,Common Stock,a stockholders' equity account.The current ratio is computed by dividing current assets by current liabilities.Since the numerator will increase,the current ratio will increase.

How Will a Company's Current Ratio Be Affected When the Company