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:

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product or service.

Marginal Cost

The increase or decrease in the total cost that arises when the quantity produced is incremented by one unit.

Marginal Value

Marginal value represents the additional satisfaction or utility a consumer receives from consuming one more unit of a good or service, influencing their decision on how much of a product to purchase.

Marginal Analysis

An examination of the benefits and costs of certain activities or financial decisions.