If the current ratio is 2 to 1,the payment of a cash dividend,which was recorded as a liability on the date of declaration,will do which of the following?
A)Increase the current ratio.
B)Decrease the current ratio.
C)Have no effect on the current ratio.
D)Invalidate earnings per share.

Question

Quizplus · Accepted Answer

The payment of a cash dividend reduces both current liabilities and current assets by the same amount, which increases the current ratio when it is initially greater than 1.

If the Current Ratio Is 2 to 1,the Payment of a Cash