An increase in the current liabilities to total assets ratio will result in ________.
A) an increase in risk
B) a decrease in risk
C) an increase in profit
D) a decrease in profit

Question

Quizplus · Accepted Answer

An increase in the current liabilities to total assets ratio indicates that a larger portion of a company's assets is financed through short term debt, which can increase its risk of default if it is unable to meet these obligations. Therefore, an increase in current liabilities to total assets ratio will result in an increase in risk.

An Increase in the Current Liabilities to Total Assets Ratio