Question

QUESTION 10 Which of the following actions will improve the current ratio? O a. Take a nine-month loan from the bank to pay off some of its suppliers b. Accelerate the collection of accounts receivable c. Sell off some old equipment d. All of these

Answer 1

Solution :-

The Correct Answer is (C) that is Sell off Old Equipment

As it we sell the old Equipment , Cash will Come means Current Asset increased and Fixed Assets Reduced which makes no effect on Current Liabilities So this one is correct

Option ( A) is incorrect Because due to it Cash Comes means Current Asset increase But short term loan shows in P and L which includes in Current Liabilities Therefore no effect on Current ratio

Option ( B ) is incorrect as Accelerate the collection of accounts receivable will reduce debtors therefore current assets decrease but cash Comes which leads to current asset increase so no effect on Current Ratio

Therefore the answer is Only C

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