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Hello Sir, I have a question regarding the effect of paid dividends to ratio, from BPP Revision Kit
After proposing a final dividend, Kenilworth Co has a current ratio of 2.0 and a quick ratio of 0.8. If the company uses its positive cash balance to pay that final dividend, what will be the effect upon these two ratios?
My answer here is that the current ratio will increase and the quick ratio will decrease, assuming the transactions will debit payables and credit cash. But on the key answer of BPP, it is said that it will decrease both as only cash is affected and the book said that proposal of dividends does not accrue anything. Can you help me shed some light on this? Im really confused
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