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

Question

Quizplus · Accepted Answer

The current ratio will increase because the reduction in current liabilities improves the ratio of current assets to current liabilities. 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