A Company Has a Current Ratio of 3:1

question 6

Multiple Choice

A company has a current ratio of 3:1. Which action will decrease this ratio?

• A) Issue of long-term debentures
• B) Sale of equipment for cash
• C) Declaration of a dividend
• D) Collection of an account receivable

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Definitions:

Cash Collected

The total amount of money received by a company during a specific period.

Expense Recognition Principle

An accounting principle that expenses should be recognized and recorded when they are incurred, not necessarily when they are paid.

Expenses Recorded

The process of documenting and recognizing incurred expenses in the financial records during a specific accounting period.