As of December 31, Year 1, Gant Corporation Had a Current

question 64

Multiple Choice

As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $29,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. On January 1, Year 2, Gant paid $3,600 on accounts payable. Which of the following statements is incorrect?

• A) Gant's quick ratio will increase, and its current ratio will decrease.
• B) Gant's quick ratio will increase.
• C) Gant's working capital will remain the same.
• D) Gant's current ratio will increase.

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Definitions:

Pretax Financial Income

The income of a company before taxes have been deducted, commonly used in the context of reporting and financial analysis.

Permanent Difference

A difference between the book income and taxable income that will not reverse over time.

Product Warranty Costs

Expenses incurred by a company to repair, replace, or reimburse for products that fail to meet specified warranties.

Municipal Bonds

Debt securities issued by states, municipalities, or counties to finance capital expenditures.