Popsi Corporation's current ratio is 0.5, while Cake Company's current ratio is 1.5. Both firms want to
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Popsi Corporation's current ratio is 0.5, while Cake Company's current ratio is 1.5. Both firms want to "window dress" their coming end-of-year financial statements. As part of their window dressing strategy, each firm will double its current liabilities by adding short-term debt and placing the funds obtained in the cash account. Which of these statements best describes the actual results of these transactions?
a. The transactions will have no effect on the current ratios.
b. The current ratios of both firms will be increased.
c. The current ratios of both firms will be decreased.
d. Only Popsi Corporation's current ratio will be increased.
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