An increase in ________ would increase a firm's current ratio and net working capital.
A) notes payable
B) inventories
C) cash
D) both B and C

Question

Quizplus · Accepted Answer

An increase in inventories (choice B) would increase a firm's current assets, thus increasing its current ratio and net working capital. Similarly, an increase in cash (choice C) would also increase a firm's current assets, thus increasing its current ratio and net working capital. Therefore, both B and C are correct choices. An increase in notes payable (choice A) would increase a firm's current liabilities and decrease its current ratio, so it is not the correct choice in this case.

An Increase in ________ Would Increase a Firm's Current Ratio