A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will
A) both decrease.
B) both increase.
C) increase and remain the same, respectively.
D) remain the same and decrease, respectively.

Question

Quizplus · Accepted Answer

The current ratio increases because the reduction in current liabilities is proportionally greater than the reduction in current assets. Working capital remains the same because both current assets and current liabilities decrease by the same amount ($1,000).

A Company with $60,000 in Current Assets and $40,000 in Current