A Company's Current Ratio Is Presently 2:1

question 25

Multiple Choice

A company's current ratio is presently 2:1. Which of the following transactions would decrease that ratio?

• A) Depreciation of plant and equipment
• B) Purchase of inventory on credit
• C) Payment of accounts payable
• D) Receive payment from accounts receivable

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Definitions:

Fixture Test

A legal test used to determine whether a physical object is permanently attached to real property and thus considered a fixture, affecting the object's legal treatment in terms of possession and property rights.

Realty

Real estate, referring to the ownership of land and property.

Affixed

Attached or secured to something in a permanent or semi-permanent way.

Material Injury

Harm or damage that is significant and not minor, affecting the value, usefulness, or normal function of something.