On December 31, 2009, Gruene Company had a current ratio of 1.46. The next day, Gruene paid an account payable of $2,000. How would this transaction affect Gruene\'s current ratio? Solution c)the current ratio will increase reason Accounts payable is money owed by a business to its suppliers shown as a liability on a company\'s balance sheet. so if it is paid the liabilities will decrease , so the current ratio will increase as it is the ratio of assets to liabilities .

1. On December 31, 2009, Gruene Company had a current ratio of 1.46. The next day, Gruene paid
an account payable of $2,000. How would this transaction affect Gruene's current ratio?
a. The current ratio will
decrease.
b. The current ratio will remain unchanged.
c. The current ratio will increase.
d. The effect of this transaction cannot be determined.
Solution
c)the current ratio will increase
reason
Accounts payable is money owed by a business to its suppliers shown as a liability on a
company's balance sheet.
so if it is paid the liabilities will decrease , so the current ratio will increase as it is the ratio of
assets to liabilities