CAN SOMEONE HELP ME ANSWER THIS QUESTION PLEASE???
Valencia Couture is going into production with a new line of ladies’ evening wear and wish to purchase large quantities of raw materials from your company. You have been asked to investigate the financial soundness and the debt-paying abilities of the company. After checking around, you discover that Valencia Couture Inc., in their most recent fiscal year, had a current ratio of 2.8, compared with 1.9 in the prior year. Their income this year was half that of the previous year.
Instructions:
a.Why would the increase in the current ratio be unexpected?
b.Identify two possible circumstances not involving borrowing or the issuance of capital stock that could account for the increase in the current ratio.