How Will a Company's Current Ratio Be Affected by the Purchase

question 212

Multiple Choice

How will a company's current ratio be affected by the purchase of equipment for cash?

• A)The current ratio will increase because current assets increase.
• B)The current ratio will decrease because current liabilities increase.
• C)The current ratio will decrease because current assets decrease.
• D)The current ratio will remain unchanged.

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Definitions:

Profit

The profit achieved when the revenue from a business operation surpasses the expenses, costs, and taxes required to maintain it.

Production Function

A mathematical model detailing how inputs are converted into outputs in the production process.

Labor

Human work, encompassing both physical and mental tasks, dedicated to the manufacturing of goods and services.

Output

The amount of goods or services produced by a company, industry, or country over a certain period.