Table 14.2 The company earns 5 percent on current assets and 15 percent on fixed assets.The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent.
-The firm would like to increase its current ratio.This goal would be accomplished most profitably by ________.(See Table 14.2)
A)increasing accounts payable
B)decreasing inventory
C)increasing accounts receivable
D)decreasing cash and cash equivalents

Question

Table 14.2  The company earns 5 percent on current assets and 15 percent on fixed assets.The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent.
-The firm would like to increase its current ratio.This goal would be accomplished most profitably by ________.(See Table 14.2)
A)increasing accounts payable 
B)decreasing inventory 
C)increasing accounts receivable 
D)decreasing cash and cash equivalents

Quizplus · Accepted Answer

Increasing accounts receivable would increase current assets without immediately affecting liabilities, thus improving the current ratio.

Table 142 the Company Earns 5 Percent on Current Assets