A Company with $70,000 in Current Assets and $50,000 in Current

question 113

Multiple Choice

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

• A) both decrease
• B) both increase
• C) increase and remain the same, respectively
• D) remain the same and decrease, respectively

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Definitions:

Minority Shareholders

Individuals or entities that own less than 50% of a company's shares, often with limited control over corporate decisions.

Cumulative Voting

A method of voting in corporate elections that allows shareholders to concentrate all their votes on one candidate as opposed to distributing them among multiple candidates.

Corporate Veil

A legal concept separating the actions and liabilities of a corporation from those of its shareholders or directors.

Personal Liability

The legal responsibility of an individual to settle a debt or pay for damages out of their own assets.