Question

Windham Corporation has current assets of $520,000 and current liabilities of $650,000. Windham Corporation's current ratio would be increased by:

Answer 1

The current ratio would increased by the purchase of $130,000 of inventory on account

Step-by-step explanation:

Calculation for Windham Corporation's current ratio

Current assets- Current liabilities

$520,000 - $650,000=$130,000

Formula for Current ratio

Current ratio = Current assets ÷ Current liabilities

= $520,000 ÷ $650,000 = 0.80

Current ratio = Current assets ÷ Current liabilities

= ($520,000 + $130,000) ÷ ($650,000 + $130,000)

=$650,000÷$780,000

=0.833

Therefore the current ratio would increased by the purchase of $130,000 of inventory on account.