What effect would the following actions have on a firm's current ratio? Assume the net working capital is positive:

(1) Inventory is purchased using cash

(2) Inventory is purchased on account

(3) A supplier who invoiced you last month is paid

(4) A long-term debt is paid off early

(5) A customer pays off a credit account

(6) Inventory is sold at a cost

(7) Inventory is sold for a profit

(8) A dividend is declared

(9) The company records annual amortization expense

(10) A company sells manufacturing equipment they were no longer using

In your answer ensure you include a brief rationale for your conclusion, as well as the overall directional impact on the current ratio. Calculations are not required.

Answer rating: 100% (QA)

1 Inventory is purchased using cash This action would decrease the current ratio because both the current assets inventory and the current liabilities ... View the full answer