Which ratio should be examined while analyzing the balance sheet to detect underrecording of accounts payable?
A)Long-term debt/Stockholder's equity
B)Warranty expense/Sales
C)Current assets/Current liabilities
D)Various accrual/Related expenses

Question

Quizplus · Accepted Answer

The current assets/current liabilities ratio should be examined while analyzing the balance sheet to detect underrecording of accounts payable because if accounts payable are not being recorded accurately, the current liabilities balance will be understated, leading to an artificially high current ratio.

Which Ratio Should Be Examined While Analyzing the Balance Sheet