The Cavendish Company recently issued new common stock and used the proceeds to pay off some of its short-term notes payable.This action had no effect on the company's total assets or operating income.Which of the following effects would occur as a result of this action?

Question

Quizplus · Accepted Answer

By using the proceeds from issuing new common stock to pay off short-term notes payable, the company's current liabilities decreased and its current assets remained the same. This means that the company's current ratio (current assets / current liabilities) increased, indicating an improvement in its ability to meet its short-term obligations. The other options are not affected by this specific action.

The Cavendish Company Recently Issued New Common Stock and Used