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

Question

Quizplus · Accepted Answer

Paying cash to reduce accounts payable decreases both current assets and current liabilities by the same amount. Since the current ratio is current assets divided by current liabilities, and the current ratio is initially greater than 1, reducing both by the same amount will increase the current ratio.

If a Firm's Current Ratio Exceeds 1