why is it when current ratio is above one, and we add notes payable and notes receivable by the same amount, the current ratio decreases?
It’s quite a strange phenomenon isn’t it. You can add inventory and accounts payable by the same amount and the current ratio decreases too (when CR > 1)
The best way to answer this is for you to make up some numbers for current assets and current liabilities and calculate the ratios before and after adding the same amount to the numerator and the denominator.
You’ll learn it a lot better by doing it yourself.
A good exercise, thanks!
My pleasure.