Given a current ratio of 5 to 1,what is the effect of paying an accounts payable to a supplier?
A)The current ratio would increase.
B)The current ratio would decrease.
C)The current ratio would remain the same.
D)The effect of the current ratio cannot be determined.

Question

Quizplus · Accepted Answer

Paying an accounts payable decreases both current assets (cash) and current liabilities by the same amount. Since the current ratio is greater than 1, this action increases the current ratio.

Given a Current Ratio of 5 to 1,what Is the Effect