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:

Legislate

The act of making or enacting laws; the power or process through which laws are made by a government's legislative body.

True Burden

The actual economic impact of a tax or fiscal policy on individuals or entities, taking into account both direct and indirect effects.

Tax

A mandatory financial charge levied by a government on individuals, corporations, or other legal entities to fund government spending and various public expenditures.