If a company revaluates its fixed assets, the current ratio of the company will:
Correct answer: B. Remain unaffected
- A. Improve if assets are revalued upward
- B. Remain unaffected
- C. Improve if assets are revalued downwards
- D. Undergo change only if liabilities are remaining constant
Explanation
Revaluing fixed assets changes non-current assets and equity, but the current ratio uses only current assets divided by current liabilities. Therefore, it remains unaffected.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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