which could account for a change in the current ratio
one reason.
Answers
Explanation:
When goods are purchased for cash the stock would increase and the cash balance would decrease and so there would be no effect on the current ratio.
When plant is acquired on account the fixed asset would increase and there would be increase in the creditors amount, hence the current ratio would decrease.
When goods are sold on credit the stock would decrease and the debtors would increase and hence there would be no effect on current ratio.
When debentures are converted into equity capital there would be no changes in current assets and current liabilities and so no change in current ratio.
Answer:
Anything that increases or decreases current assets or current liabilities can affect working capital and the current ratio. The more quickly Inventory and Accounts Receivable can be converted to cash, the more secure your cushion. ... collect outstanding accounts receivable. pay off some current liabilities