A Company with $60,000 in Current Assets and $40,000 in Current

question 122

Multiple Choice

A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability.As a result of this transaction, the current ratio and working capital will

• A)both decrease.
• B)both increase.
• C)increase and remain the same, respectively.
• D)remain the same and decrease, respectively.

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Definitions:

Fixed Costs

Fixed expenses, including rent, salaries, and insurance, that are unaffected by variations in production or sales levels.

Units Produced

A measure of output representing the total number of units of a product made by a company or an industry during a given period.

Costs

The monetary value spent by a company to produce goods or services, including expenses such as materials, labor, and overhead.

Forecasting Risk

The risk associated with the potential inaccuracies in predicting future developments, which can impact planning and decision-making.