If a Firm's Current Ratio Exceeds 1

question 79

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.

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Definitions:

Winding Up

The process of liquidating a company's assets and distributing the proceeds to creditors and shareholders, effectively closing the business.

Optimize Return

To make adjustments or take actions that maximize the benefits or profits gained from an investment or activity.

Dissociates

The act of separating or detaching oneself from a legal, business, or personal relationship.

Limited Liability Company

A legal entity where the owners are protected from personal liability for the debts of the company beyond their initial investment.