Homework Answers
At present current ratio which is equal to current assets divided by current liabilities =1.45
(a)when long term mortgage refinanced into short term debt then current liabilities will be increased by $60000
Now ,current ratio=400000/335000=1.19
(b)In this case current ratio will remain same ,there will be no impact on current ratio that means current ratio will be 1.45.
This is because when amount collected from recievables then debtors reduced but at the same time we got the cash .Hence,current assets reduced and increased by same amount.
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