If a Company Uses Cash to Pay Off Some of Its

question 87

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:

Graphical User Interface

A visual way of interacting with a computer using items like windows, icons, and menus, intended to make software easier to use.

Operating System

A software that manages the hardware and software resources of a computer and provides common services for computer programs.

File Storage

A system for saving data in a computer or on the internet, so that it can be used in the future.

ROM

Read-Only Memory, a type of storage medium that is used to store firmwares that are seldom changed during the life of the system.