Ratios: Working Capital and the Current Ratio Video Lessons

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Problem: All other things being equal, which of the following would decrease the current ratio? a. Equipment is purchased with short-term notes. b. A fixed asset is sold for more than book value. c. Cash is acquired through issuance of additional common stock. d. Short-term promissory notes are issued to trade creditors in exchange for past-due accounts payable. e. Ten-year notes are issued to pay off accounts payable.

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Problem Details

All other things being equal, which of the following would decrease the current ratio?

a. Equipment is purchased with short-term notes.

b. A fixed asset is sold for more than book value.

c. Cash is acquired through issuance of additional common stock.

d. Short-term promissory notes are issued to trade creditors in exchange for past-due accounts payable.

e. Ten-year notes are issued to pay off accounts payable.

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