Question

One way to increase the current ratio is by: a. buying treasury stock with cash b....

One way to increase the current ratio is by:

a. buying treasury stock with cash

b. issuing common stock for cash  

c. collecting cash on accounts receivable

d. buying equipment with cash

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Homework Answers

Answer #1
Answer: b. issuing common stock for cash

Explanation:

Current assets includes cash. When current assets increases, current ratio will increase. When buying treasury stock with cash, cash decreases and results in decrease of current ratio. If cash is collected on accounts receivable, there is no effect on current assets. Because, cash is increased and accounts receivable is decreased. When the company buys equipment with cash, current assets decreased. When the company issues stock for cash, cash is increased. Thereby, increase in current ratio.

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