If a company has a current ratio of 2 to 1,and purchases inventory on credit,what will this do to its current ratio?
A)Increase the current ratio.
B)Decrease the current ratio.
C)Does not change the current ratio.
D)Cannot be determined.

Question

Quizplus · Accepted Answer

Purchasing inventory on credit increases the company's current liabilities, which will decrease the current ratio (current assets divided by current liabilities).

If a Company Has a Current Ratio of 2 to 1,and