All else being equal, which one of the following will decrease a firm's current ratio?

Question

Quizplus · Accepted Answer

Current ratio is calculated by dividing current assets by current liabilities. If a firm's current liabilities increase without any change in current assets, the current ratio will decrease. An increase in accounts payable will increase current liabilities, resulting in a lower current ratio. A decrease in net fixed assets or depreciation will not affect the current ratio since these items are not included in the calculation of current assets or liabilities. Therefore, the correct option is C - an increase in accounts payable.

All Else Being Equal, Which One of the Following Will