If a firm issues long‑term debt and uses the proceeds to retire short‑term debt, the current ratio is unaffected.

Name: If a firm issues long‑term debt and uses the proceeds to retire short‑term debt, the current ratio is unaffected.
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Question

If a firm issues long‑term debt and uses the proceeds to retire short‑term debt, the current ratio is unaffected.​

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. Retiring short-term debt decreases current liabilities, which would increase the current ratio if current assets remain unchanged.

If a Firm Issues Long‑term Debt and Uses the Proceeds