A Firm Has $600,000 in Current Assets and $150,000 in Current

question 56

Multiple Choice

A firm has $600,000 in current assets and $150,000 in current liabilities.Which of the following is correct if it uses cash to pay off $50,000 in accounts payable?

• A)current ratio will increase to 5.0.
• B)net working capital will increase to $500,000.
• C)current ratio will decrease.
• D)net working capital will not change.

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Definitions:

Leaching

The process by which soluble materials are washed out from soil or wastes, often leading to contamination of waterways.

Nitrate Ions

An anionic form of nitrogen (NO3-) found in soil and water, often resulting from agricultural runoff, and crucial to the nitrogen cycle.

Phosphorus Reservoirs

Natural or artificial storage places for phosphorus, an essential nutrient for plants and animals.

Nitrogen Fixation

Nitrogen fixation is a process by which nitrogen gas from the atmosphere is converted into ammonia or related nitrogenous compounds in soil, making nitrogen accessible to living organisms.