Accountant Financial Ratio
Assume that Net Working Capital is positive for a business entity and its current ratio is 1.2 times. How would the following events affect (increase/decrease/no effect) the current ratio of the company. Also provide the conceptual reason behind each effect.
1. Inventory is purchased on credit.
2. Repayment of last installment of a long term loan.
3. A credit customer pays off on a discount of 3%.
4. Improvement in current assets through new equity issue.
What will be the following:
Event ?
Effect?
Reason?
1. Inventory is purchased on credit.
2. Repayment of last installment of a long term loan.
3. A credit customer pays off on a discount of 3%.
4. Improvement in current assets through new equity issue.
What will be the following:
Event ?
Effect?
Reason?
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