Question

Houston Company's current ratio is 3 to 2. The company is negotiating a loan, and the company's management understands that a higher (i.e., better) current ratio will reduce the company's cost of borrowing (interest rate). Which of the following transactions will improve Houston Company's current ratio? Select one:
a. making a payment on a long-term debt
b. using cash to pay current liabilities
c. purchasing inventory on account
d. collecting on some of the company's accounts receivable
e. none of the above

Answer 1

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