Chapter 4, Problem 4.1FC

To determine

Introduction: Current ratio measures a company’s ability to pay company’s liabilities over its current assets. The ratio is defined as current assets / current liabilities. A ratio more than or equal to 1.50 is considered healthy for a company and below 1 or 1 is considered risky for the business.

Requirement 1:

To explain:

The affect of fraudulent accounting on the current ratio

To determine

Requirement 2:

To State:-

Reasons to take such fraudulent action