Elder Enterprises is consistently profitable.  It’s normal financial statement ratios include that it has a current ratio of 2 to 1 and the inventory turnover is 4 times.  Determine the effect on each ratio of this transaction: Accounts Payable are paid at year end. The current ratio increases; inventory turnover increases

Elder Enterprises is consistently profitable.  It’s normal financial statement ratios include that it has a current ratio of 2 to 1 and the inventory turnover is 4 times.
Determine the effect on each ratio of this transaction: Accounts Payable are paid at year end.

The current ratio increases; inventory turnover increases

The current ratio is unaffected; inventory turnover is unaffected

The current ratio increases; inventory turnover is unaffected

The current ratio is unaffected; inventory turnover decreases

 
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The post Elder Enterprises is consistently profitable.  It’s normal financial statement ratios include that it has a current ratio of 2 to 1 and the inventory turnover is 4 times.  Determine the effect on each ratio of this transaction: Accounts Payable are paid at year end. The current ratio increases; inventory turnover increases appeared first on Superb Professors.

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