All else being equal, which one of the following will decrease a company's current ratio?
A) a decrease in the net fixed assets
B) a decrease in depreciation
C) an increase in accounts payable
D) None of the above

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Accounts payable are a part of current liabilities. Therefore, an increase in accounts payable will lead to a decrease in the current ratio, as it lowers the numerator (current assets) relative to the denominator (current liabilities). Choices A and B will have no effect on the current ratio since they do not directly impact the company's current assets or liabilities.

All Else Being Equal, Which One of the Following Will