Question
Pepsi Corporation's current ratio is 1.25, while Coke Company's current ratio is 0.75. Both firms will attempt to window dress their coming end-of-year financial statements.
Pepsi Corporation's current ratio is 1.25, while Coke Company's current ratio is 0.75. Both firms will attempt to "window dress" their coming end-of-year financial statements. As part of their window dressing strategy, Pepsi will triple its current liabilities by adding short-term debt and placing the funds obtained in the cash account. Coke will double its total liabilities by adding long-term debt and placing the funds obtained in the cash account. Which of the statements below best describes the actual results of these transactions?
Only Pepsis current ratio will be decreased Both current ratios of both firms will be decreased Both current ratios of both firms will be increased Only Pepsis current ratio will be increased The transactions will have no effect on both current ratios
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