An increase in current liabilities will have which one of the following effects,all else held constant? Assume all ratios have positive values.
A)increase in the cash ratio
B)increase in the net working capital to total assets ratio
C)decrease in the quick ratio
D)decrease in the cash coverage ratio
E)increase in the current ratio

Question

Quizplus · Accepted Answer

The quick ratio is calculated as (Current Assets - Inventory) / Current Liabilities. An increase in current liabilities will reduce the numerator, resulting in a decrease in the quick ratio. The other ratios listed are not directly impacted by changes in current liabilities.

An Increase in Current Liabilities Will Have Which One of the Following