If Total Liabilities Increased by $8,000, Then

question 194

Multiple Choice

If total liabilities increased by $8,000, then

• A) assets must have decreased by $8,000.
• B) stockholders' equity must have increased by $8,000.
• C) assets must have increased by $8,000, or stockholders' equity must have decreased by $8,000.
• D) assets and stockholders' equity each increased by $4,000.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its current assets, calculated as current assets divided by current liabilities.

Acid-Test Ratio

An economic indicator assessing the capability of a business to fulfill its immediate liabilities using its most liquid assets, without counting inventory.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue from its credit customers.

Current Ratio

A measure of a company’s capability to settle short-term debts using its current assets.