If the Acid-Test Ratio Is Less Than One, Then Paying

question 165

True/False

If the acid-test ratio is less than one, then paying off some current liabilities with cash will increase the acid-test (quick) ratio.

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Definitions:

NSF Check

A check that cannot be processed due to insufficient funds in the account it's drawn from, often resulting in a fee.

Bank Statement

A summary issued by a bank detailing all transactions in an account over a specified period.

Outstanding Checks

Checks that have been written and recorded in the check issuer's accounting system but have not yet been cashed or cleared by the bank.

Bank Statement

A monthly or periodic statement summarizing the financial transactions and status of an account holder's bank account.