Answer (D) is correct . The current ratio is the ratio of current assets to current liabilities. By reducing net receivables, an increase in the allowance for uncollectible accounts lowers the amount of current assets (the numerator), reducing the overall ratio.
Answer (A) is incorrect because By reducing net receivables, an increase in the allowance for uncollectible accounts lowers the acid test (quick) ratio.
Answer (B) is incorrect because By reducing net receivables, an increase in the allowance for uncollectible accounts lowers the level of working capital.
Answer (C) is incorrect because By reducing net receivables, an increase in the allowance for uncollectible accounts lowers total assets, raising the debt-to-asset ratio.
