Having some difficulty with the following...


Juan Foods pays off a long-term debt in full. Which one of the following statements describes the effect of the sale on Juan Foods?

A.Current ratio increases; total debt to equity ratio decreases
B.Current ratio decreases; total debt to equity ratio decreases
C.Current ratio decreases; total debt to equity ratio increases
D.Current ratio increases; total debt to equity ratio increases

Any help would be greatly appreciated

Analyse the transaction for its effect on Balance Sheet Equation.
Payment of long term debts will reduce current assets and reduce long term liability.
The obvious answer is B: Current ratio decreases; total debt to equity ratio decreases

Thank you for your prompt reply. I really appreciate it!