Debentures boost cash but add interest costs

Steps:

• Issuing debentures provides cash inflow, raising current assets.
• Debentures classify as long-term liabilities, not affecting current liabilities.
• Net current assets (current assets minus current liabilities) therefore increase.
• Interest on debentures counts as an expense, lowering short-term profits.

Why C is correct:

• Net current assets rise from cash increase without current liability impact; profits fall per accounting rules where interest expense reduces net income.

Why the others are wrong:

• A: Net current assets increase, not decrease.
• B: Short-term profits decrease due to interest, not increase.
• D: Short-term profits decrease, not increase.

Final answer: C