A Company's Current Ratio Is Greater Than 1

question 288

Multiple Choice

A company's current ratio is greater than 1. Purchasing raw materials on credit would:

• A)increase the current ratio.
• B)decrease the current ratio.
• C)increase net working capital.
• D)decrease net working capital.

---

Definitions:

Private Enterprises

Businesses that are owned by private individuals or groups and not publicly traded on a stock exchange, often subject to different regulatory and reporting requirements than public companies.

Disclosed Basis of Accounting

The accounting principles and policies a company openly reports in its financial statements.

GAAP

Generally Accepted Accounting Principles, a common set of accounting principles, standards, and procedures that companies must follow when they compile their financial statements in the U.S.

Fair Value

The price at which an asset would be exchanged between knowledgeable, willing parties in an arm's length transaction.