Indicate the effect of the following actions on cash levels and current ratio. A

Question

Indicate the effect of the following actions on cash levels and current ratio. Assume the company has a current ratio greater than one. Indicate whether the effect is to increase (I), decrease (D), or if it has no effect (NE). Consider each action independent from the others.

                                                             Current Ratio      Cash

Sell accounts receivable at face value                          

Pay suppliers more slowly

Sell equity

Change from FIFO to weighted average inventory

Increase bad debt expense

Explanation / Answer

Answer:

Current ratio Cash Sell accounts receivable at face value                           NE Increase Explanation: It is only resuffling of in between receivable and cash with in current asset in nenominator.

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