Which of the Following Situations Will Improve the Current Ratio

question 90

Multiple Choice

Which of the following situations will improve the current ratio if it is initially less than 1.0?

• A) Using cash to repay accounts payable
• B) Purchasing inventory on credit terms
• C) Selling finished goods inventory on credit
• D) Purchasing marketable securities for cash

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Definitions:

Restricted Fund Method

An accounting approach used for reporting funds that have restrictions placed on them by donors or grantors.

Deferral Method

An accounting technique that postpones the recognition of income or expenses until a future date.

Revenue Level

The total amount of income generated from the sale of goods or services before any costs or expenses are deducted.

GAAP

The Generally Accepted Accounting Principles represent the framework and specific rules for financial accounting and reporting in the United States, promoting consistency and clarity.