Question

Over the past two years, Cute Camel Woodcraft Company has relied more on the use of short-term debt than on long-term debt financing. This statement is ________- because
a. Cute Camel's total notes payable increased by $43 million, while its common stock account increased by $1,340 million
b. Cute Camel's total current liabilities increased by $172 million, while its use of long-term debt increased by $515 million
c. Cute Camel's total current liabilities decreased by $172 million, while its long-term debt account decreased by $515 million

Answer 1

Answer:

c. Cute Camel's total current liabilities decreased by $172 million, while its long-term debt account decreased by $515 million

Since short term liabilities (current liabilities) increase while long term liabilities decrease, it means that the company is relying more on short term liabilities.

Explanation:

Option A is wrong because notes payable are generally part of long term liabilities. Only the portion of notes payable due within one year is reported as current liabilities.

Option B is wrong because long term liabilities increase much more than short term liabilities.