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A Company Has the Following Current Assets and Current Liabilities

question 92

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A company has the following current assets and current liabilities (all figures in '000s) :  Cash and accounts receivable $1,000 Inventory and prepaid expense 1,000 Current liabilities 1,500\begin{array} { l r } \text { Cash and accounts receivable } & \$ 1,000 \\\text { Inventory and prepaid expense } & 1,000 \\\text { Current liabilities } & 1,500\end{array} The company is concerned about not looking liquid enough and is considering using $500,000 of their cash to pay down the some bank debt.What would be the effect on their current ratio and quick ratio?
 Current  Quick  Ratio  Ratio A. Increase  Increase B. Increase  Decrease C. Decrease  Increase D. Decrease  Decrease \begin{array}{ll}&\text { Current } & \text { Quick } \\&\text { Ratio } & \text { Ratio }\\A.&\text { Increase } & \text { Increase } \\B.&\text { Increase } & \text { Decrease } \\C.&\text { Decrease } & \text { Increase } \\D.&\text { Decrease } & \text { Decrease }\end{array}


Definitions:

Linear Model

A statistical method that models the relationship between a dependent variable and one or more independent variables using a linear equation.

Kilowatt-Hours

Kilowatt-hours, abbreviated kWh, measure energy usage or production over time, indicating the amount of energy equivalent to the steady power of one kilowatt running for one hour.

Linear Model

A model that describes a linear relationship between two or more variables, where the change in the dependent variable is proportional to the change in the independent variables.

Electricity Usage

The amount of electrical energy consumed by a household, business, or device.

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