Which of the following transactions would result in an increase in the current ratio?
A)Collection of cash from an account receivable.
B)Selling shares of stock to stockholders in exchange for cash.
C)Purchasing a building by signing a long-term note payable.
D)Declaration of a cash dividend by the board of directors.

Question

Quizplus · Accepted Answer

The current ratio is current assets divided by current liabilities. Receiving cash increases current assets and increases the current ratio. Issuing stock does not impact current assets or current liabilities; stockholders' equity is increased.

Which of the Following Transactions Would Result in an Increase