What would result in a decrease in the current ratio?

The current ratio is calculated by dividing current assets by current liabilities. A decrease in the current ratio means that either current assets have decreased, current liabilities have increased, or both.

Increasing accounts payable would directly increase current liabilities without any corresponding increase in current assets. As accounts payable rises, the bottom part of the current ratio equation (current liabilities) increases, which causes the overall ratio to drop, assuming current assets remain unchanged. This modification disturbs the balance needed for a favorable current ratio, leading to a less favorable financial position in terms of liquidity.

Given that purchasing inventory on credit also affects the current liabilities but would also increase current assets (as inventory is a current asset), the net impact could potentially lead to a stable or increased current ratio depending on the figures. Collecting accounts receivable increases cash (current assets), improving the ratio, while paying off a short-term loan would decrease liabilities but also lower current assets, which does not inherently lead to a decrease in the ratio as current assets are reduced.

Therefore, increasing accounts payable is the action that unequivocally results in a decrease in the current ratio because it raises current liabilities without any increase in current assets.