A decrease in the current liabilities to total assets ratio has the effects of ________ on profits and ________ on risk.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; a decrease
D) a decrease; an increase

Question

Quizplus · Accepted Answer

A decrease in the current liabilities to total assets ratio means that the company has less short-term debt relative to its assets. This can lead to a decrease in profits because the company has less interest expense to pay. It can also lead to a decrease in risk because the company is less likely to default on its short-term debt.

A Decrease in the Current Liabilities to Total Assets Ratio