If a Company Uses Cash to Pay Off Some of Its

question 51

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 1.0 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:

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A measure of the dispersion or spread of a set of data points, calculated as the average of the squared deviations from the mean.

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A probability distribution that represents the number of successes in a fixed number of independent trials, with only two possible outcomes.

Binomial Experiment

An experiment or trial that leads to two possible outcomes, often termed success and failure, and follows a binomial distribution.