Which of the following ratios will increase in a liability fraud?
A) Accounts payable ÷ purchases
B) Interest expense ÷ notes payable
C) Total liabilities ÷ total assets
D) Lease expense ÷ total fixed assets

Question

Quizplus · Accepted Answer

A: Incorrect, purchases will remain the same, but AP will fall
B: Correct, interest expense will remain high while notes payables are reduced
C: Incorrect, liabilities will be understated
D: Incorrect, lease expense will be understated

Which of the Following Ratios Will Increase in a Liability