A firm has $600,000 in current assets and $150,000 in current liabilities.Which of the following is correct if it uses cash to pay off $50,000 in accounts payable?
A) Current ratio will increase to 5.0.
B) Net working capital will increase to $500,000.
C) Current ratio will decrease.
D) Net working capital will not change.

Question

Quizplus · Accepted Answer

Paying off $50,000 in accounts payable reduces both current assets and current liabilities by the same amount, leaving net working capital unchanged.

A Firm Has $600,000 in Current Assets and $150,000 in Current