Question
Taco Bell's current ratio is three times that of McDonald. Each firm plans to double its current liabilities by adding short-term notes payable and placing
Taco Bell's current ratio is three times that of McDonald. Each firm plans to double its current liabilities by adding short-term notes payable and placing the funds obtained in the cash. If Taco Bell's current ratio is 1.5 and McDonalds is one third of that, which of the statements below best describes the actual results of the borrowing?
a. There is no effect on the current ratios.
b. The current ratios of both firms increases.
c. The current ratios of both firms decreases.
d. Only McDonalds' current ratio increases.
e. Only Taco Bell's current ratio increases.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started