If a Company Uses Cash to Pay Off Some of Its

question 6

Multiple Choice

If a company uses cash to pay off some of its accounts payables, what effect will this have on its liquidity ratios, given that the ratios exceeded 1 before the payoff?

• A)the quick ratio and current ratio will both increase.
• B)the quick ratio and current ratio will both decrease.
• C)the quick ratio will increase but the current ratio will remain unchanged.
• D)the current ratio will increase but the quick ratio will remain unchanged.

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Definitions:

Captives

Individuals who are taken and held as prisoners, often in the contexts of war, slavery, or criminal activity.

Comanche

A Native American nation historically known for their skill as horsemen and warriors, whose homeland is located in the present-day southern Great Plains of the United States.

Southern Plains

A geographic area in the United States known for its flat landscapes, extending through parts of Texas, Oklahoma, Kansas, and New Mexico.

Settlement of Texas

The process in the 18th and 19th centuries whereby settlers, primarily from the United States, moved into the region of Texas, leading to its eventual annexation into the U.S.