Pepsi Corporation's Current Ratio Is 0

question 12

Multiple Choice

Pepsi Corporation's current ratio is 0.5, while Coke Company's current ratio is 1.5. Both firms want to "window dress" their coming end-of-year financial statements. As part of their window dressing strategy, each firm will double its current liabilities by adding short-term debt and placing the funds obtained in the cash account. Which of the statements below best describes the actual results of these transactions?

• A) The transactions will have no effect on the current ratios.
• B) The current ratios of both firms will be increased.
• C) The current ratios of both firms will be decreased.
• D) Only Pepsi Corporation's current ratio will be increased.
• E) Only Coke Company's current ratio will be increased.

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Definitions:

Outsourcing Increase

The growing trend or act of contracting out tasks, functions, or jobs to external service providers or companies.

Revenue

The total amount of income generated by the sale of goods or services related to a company's primary operations.

Suppliers

Businesses or individuals that provide goods or services to another entity, typically within a supply chain.

Chief Executive Officer

The highest-ranking officer in a company or organization, responsible for overall management and decision-making.