Use the Following Information for Questions

question 34

Multiple Choice

Use the following information for questions.
Nelly Inc. reported net credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year. The average inventory for the year was $6,000,000.
-Best Baskets Limited (BBL) had a current ratio of 0.8:1 before borrowing $50,000 from the bank with a short-term note payable. What effect did the borrowing transaction have on BBL's current ratio?

• A) The ratio remained unchanged.
• B) The ratio decreased.
• C) The ratio increased.
• D) Cannot be determined.

---

Definitions:

Anticipatory Repudiation

A contractual party's indication, before their due performance time, that they will not fulfill their contractual obligations.

Substantially Impairs

Refers to a significant negative effect or reduction in the quality, value, or functionality of something.

Aggrieved Party

An individual or group that has suffered harm or infringement of rights, leading to the filing of a lawsuit or legal claim.

Custom-Made

Products or goods that are specifically designed and made according to the customer's specifications.