ACME Inc. has a Current Ratio of 2.30x and a Quick Ratio of 0.85x Next week...
ACME Inc. has a Current Ratio of 2.30x and a Quick Ratio of 0.85x
Next week the company will issue $2.3 million in common stock and use the funds to pay off $1.5 million in long term debt and the remaining $800,000 to expand its current factory. These action will result in which of the following
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The Current Ratio will increase & the Quick Ratio will increase |
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The Current Ratio will decline & the Quick Ratio will decline |
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The Current Ratio will not change & the Quick Ratio will not change |
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The Current Ratio will increase & the Quick Ratio will not change |
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The Current Ratio will not change & the Quick Ratio will decrease |
Homework Answers
Curren Ratio calculates the relationship between Current Assets and Current Liabilities and the Quick Ratio explains about the liquidity position to cover the short term liabilities; This explain the relationship between high liquid current assets like cash , marketable securities and further with Total Current Liabilities;
In the given case, company will issue $2.3 million in common stock (EQUITY) and use the funds to pay off $1.5 million in long term debt (LONG TERM LIABILITIES) and the remaining $800,000 to expand its current factory (FIXED ASSETS).
In this case, neither any of these shall impact either current assets or current liabilities;
Answer is: The Current Ratio will not change & the Quick Ratio will not change
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ACME Inc. has a Current Ratio of 2.30x and a Quick Ratio of
0.85x
Next week...
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