A Firm Has a Current Ratio Greater Than 1 $\begin{array}{lc}\underline{\text { Accounts receivable turnover} } \quad \underline{\text { Current ratio} }\end{array}$

A firm has a current ratio greater than 1.0. During the course of the year the firm sells $60 million of accounts receivable with limited recourse. If it had not sold the receivables it would have taken out a short-term loan. The effect of selling the receivables is:
$\begin{array}{lc}\underline{\text { Accounts receivable turnover} } \quad \underline{\text { Current ratio} }\end{array}$
A. $\begin{array}{lc}\quad\quad\quad\quad\text { higher } &\quad\quad\quad\quad\quad\quad \text { lower } \\\end{array}$
B. $\begin{array}{lc}\quad\quad\quad\quad\text { higher } & \quad\quad\quad\quad\quad\quad\text { higher } \\\end{array}$
C. $\begin{array}{lc}\quad\quad\quad\quad\text { lower } &\quad\quad\quad\quad\quad\quad \text { lower } \\\end{array}$
D. $\begin{array}{lc}\quad\quad\quad\quad\text { lower } &\quad\quad\quad\quad\quad\quad \text { higher }\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Correct Answer:

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