Pepsi Corporation’s current ratio is 1.25

Pepsi Corporation’s current ratio is 1.25, while Coke Company’s current ratio isPepsi Corporation’s current ratio is 1.25, while Coke Company’s current ratio is 0.75. Both firms willattempt to “window dress” their coming end-of-year financial statements. As part of their window dressingstrategy, Pepsi will triple its current liabilities by adding short-term debt and placing the funds obtained inthe cash account. Coke will double its total liabilities by adding long-term debt and placing the fundsobtained in the cash account. Which of the statements below best describes the actual results of thesetransactions?OOnly Pepsi’s current ratio will be decreased.Both current ratios of both firms will be decreased.Only Pepsi’s current ratio will be increased.The transactions will have no effect on both current ratios.Both current ratios of both firms will be increased.

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