A company with $75,000 in current assets,$37,500 in quick assets,and $45,000 in current liabilities makes a payment of a $3,000 oncurrent debt.As a result of this transaction,the current ratio and quick ratio will
A)both decrease.
B)increase and decrease,respectively.
C)both increase.
D)remain the same and decrease,respectively.

Question

Quizplus · Accepted Answer

The current ratio increases because the reduction in current liabilities ($3,000) is greater than the reduction in current assets ($3,000). The quick ratio decreases because the reduction in quick assets ($3,000) is equal to the reduction in current liabilities, but the quick assets are a smaller subset of current assets.

A Company with $75,000 in Current Assets,$37,500 in Quick Assets,and