Holding all other variables constant, which of the following could cause a firm's current ratio to decrease from 3.0 to 2.5? An increase in
A) inventory
B) long-term debt
C) accounts receivable
D) accounts payable

Question

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. An increase in accounts payable, a current liability, would increase the denominator, thus decreasing the current ratio if all other factors remain constant.

Holding All Other Variables Constant, Which of the Following Could