When analyzing the balance sheet for under recorded accounts payable which of the following ratios is applicable?
A) Long-term debt/Stockholder's Equity
B) Warranty Expense/Sales
C) Current Ratio
D) Various accrual/Related expenses

Question

Quizplus · Accepted Answer

The current ratio compares a company's current assets to its current liabilities, providing an indication of its ability to meet its short-term obligations. Under recorded accounts payable would lead to an artificially high current ratio, as the liabilities are understated. Therefore, analyzing the current ratio can provide insight into any potential under recorded accounts payable.

When Analyzing the Balance Sheet for Under Recorded Accounts Payable