Scott Company had a current ratio of 2.57:1 in Year 1 and 2.76:1 in Year 2.This change in current ratio indicates:
A)the company's debt paying ability has improved.
B)the company's debt paying ability has weakened.
C)the company's customers are paying their accounts sooner.
D)the company is able to sell its inventory faster.

Question

Quizplus · Accepted Answer

The increase in the current ratio from Year 1 to Year 2 indicates that the company's ability to pay its short-term liabilities with its short-term assets has improved, suggesting an improvement in its debt-paying ability.

Scott Company Had a Current Ratio of 2