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1. What effect would the following actions have on a firm’s current ratio? Assume that new working capital is positive.

a. A short term bank loan is repaid.
b. A long-term debt is paid off early.

For a, would the current ratio move away from 1.

For b, would the current ratio be unaffected because the long-term debt is not factored into the current ratio, just current liabilities.

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