posted by Alice .
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.