Question 24

After preparing its draft financial statements, an entity's total current assets are less than its total current liabilities.

The entity is considering whether to reclassify an overdraft balance from an interest-bearing liability to an offset against Cash and cash equivalents.

Based on the figures presented in the statement of financial position, which of the following statements regarding the impact of this reclassification is correct?

Group of answer choices

A. Both the current ratio and the working capital will decrease.

B. The current ratio will decrease, but the working capital will remain the same.

C. Both the current ratio and the working capital will remain the same.

D. Both the current ratio and the working capital will increase.

E. The current ratio will increase, but the working capital will remain the same.