If current assets exceed current liabilities, payments to creditors made on the last day of the month will:
A)increase current ratio.
B)decrease net working capital.
C)increase net working capital.
D)decrease current ratio.
E)have no effect on either the current ratio or net working capital.

Question

Quizplus · Accepted Answer

Paying off current liabilities with current assets will reduce both by the same amount, increasing the current ratio since the ratio of current assets to current liabilities will be higher.

If Current Assets Exceed Current Liabilities, Payments to Creditors Made