A company with a current ratio of 2.4 times will see that ratio decrease when the company
A)pays a large current liability.
B)declares a 10 percent stock dividend on its common stock.
C)borrows cash by issuing a short-term note payable.
D)converts a short-term liability to a long-term liability.

Question

Quizplus · Accepted Answer

Borrowing cash by issuing a short-term note payable increases current liabilities without a corresponding increase in current assets, thus decreasing the current ratio.

A Company with a Current Ratio of 2