If a Firm's Current Ratio Exceeds 1

question 33

Multiple Choice

If a firm's current ratio exceeds 1.0, what happens as a result of paying cash to reduce accounts payable?

• A)net working capital increases
• B)net working capital decreases
• C)current ratio increases
• D)current ratio decreases

---

Definitions:

Stradivarius Violin

A Stradivarius violin refers to one of the string instruments built by members of the Stradivari family, particularly by Antonio Stradivari, renowned for their superb craftsmanship and powerful sound qualities, highly prized and valuable.

Fraud in the Inducement

A deceitful practice where one party intentionally misleads another to enter into a contract, thereby causing harm.

Unilateral Mistake

A situation in contract law where only one party to a contract is mistaken about the terms or conditions contained in the contract agreement.

Contract Term

A specific duration or period during which an agreement is effective and enforceable by law.