If current assets exceed current liabilities, the payment of accounts payable will:
A)decrease the current ratio.
B)increase the level of cash held.
C)increase the current ratio.
D)do none of the above.

Question

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. If current assets increase relative to current liabilities, this will result in a higher current ratio. Therefore, the payment of accounts payable will increase the current ratio.

If Current Assets Exceed Current Liabilities, the Payment of Accounts