Asked by Katelyn Nartiff on Jun 25, 2024
Verified
A company's current ratio and its acid-test ratio are both greater than 1.Payment of an account payable would:
A) increase the current ratio but the acid-test ratio would not be affected.
B) increase the acid-test ratio but the current ratio would not be affected.
C) increase both the current and acid-test ratios.
D) decrease both the current and acid-test ratios.
Acid-Test Ratio
A financial metric used to determine a company's short-term liquidity position by comparing its most liquid assets (excluding inventory) to its current liabilities.
Current Ratio
A liquidity measure that assesses a company's ability to pay its short-term obligations with its short-term assets.
Account Payable
An obligation or liability of a company to pay a short-term debt to its creditors or suppliers.
- Familiarize oneself with liquidity and solvency evaluations, particularly through the use of the current ratio and acid-test (quick) ratio.
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Learning Objectives
- Familiarize oneself with liquidity and solvency evaluations, particularly through the use of the current ratio and acid-test (quick) ratio.
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