Question

28. Considered alone, which of the following would increasea company’s current ratio?

a.An increase in net fixed assets.
b.An increase in accrued liabilities.
c.An increase in notes payable.
d.An increasein accounts receivable.
e.An increase in accounts payable.

Answer 1

d.An increase in accounts receivable.

Step-by-step explanation:

The current ratio is one of the liquidity ratios. It measures the company's ability to meet its current liabilities. The higher the ratio, the more financially healthy a company is. The calculation of the current ratio is by dividing current assets by current liabilities.

Current assets include inventory, cash and cash equivalents, accounts receivable, and prepaid expenses . Examples of current liabilities include accounts payable, accrued liabilities like dividend, and payroll, Short-term debt, and the current portion of long-term debt.

An increase in current liabilities increases the current ration. The bigger the numerator is over the denominator, the better the current ratio.