Holding all other variables constant, which of the following could cause a firm's current ratio to decrease from 3.0 to 2.5? An increase in [blank].
A)inventory
B)long-term debt
C)accounts receivable
D)accounts payable

Question

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. An increase in accounts payable (a current liability) would increase the denominator, thus decreasing the current ratio if all other variables remain constant.

Holding All Other Variables Constant, Which of the Following Could