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how will a company's current ratio be affected by the purchase of equipment for cash

how will a company's current ratio be affected by the purchase of equipment for cash

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Company's current ratio be affected by the purchase of equipment for cash because it will result in decrease in current assets.Purchasing of equipment for cash means increase in non-current assets(as equipment is fixed asset) and decrease in current assets .Since cash is decreasing, it will decrease the total current assets,hence the current ratio will decrease .

Note: Current ratio =total current assets/ total current liabilities

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