Which of the following options indicates an increase in a current liability?

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Master the UCF ACG2021 Principles of Financial Accounting Final Exam. Study with comprehensive practice tests, flashcards, and multiple choice questions, each with detailed explanations. Ace your exam!

An increase in a current liability typically signifies that a company has taken on more short-term obligations that it needs to settle within a year. The option indicating a decrease in current assets points to a situation where the company may not have enough cash or other liquid assets to cover its short-term obligations. When current liabilities increase, it means the company has borrowed more or delayed payments, increasing its obligations.

Current liabilities often rise when a company experiences a drop in current assets, as the resources needed to cover obligations might be diminishing, prompting the company to incur additional liabilities to maintain operations. This decrease suggests a strain on liquidity and may require the company to rely more on credit or other short-term financing.

In contrast, options mentioning increases in net income or decreases in stockholders' equity typically reflect overall profitability and ownership value rather than direct changes to liability accounts. Similarly, a decrease in cash flow from operations indicates potential cash flow issues, but it does not directly imply a rise in current liabilities. Therefore, the correct answer clearly highlights the relationship between current asset management and the need to incur new liabilities for maintaining operational stability.