Assume a Company Now Has a Current Ratio of 3

question 57

Multiple Choice

Assume a company now has a current ratio of 3. Just before year end, it decides to pay back some of its current liabilities, using its cash. Which of the following statements is correct regarding the effect of this decision?

• A) The current ratio will decrease.
• B) Its interest coverage ratio will increase.
• C) Its capital structure leverage ratio will decrease.
• D) Its return on assets will decrease.