If the Maker of a Note Fails to Pay the Debt

question 80

True/False

If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.

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Definitions:

Acid-test Ratio

The acid-test ratio is a financial metric used to assess a company's ability to pay off its short-term liabilities with its most liquid assets, excluding inventory.

Short-term Investments

Financial assets that are expected to be converted into cash or sold within a year or the operating cycle, whichever is longer.

Current Liabilities

Short-term financial obligations that are due to be paid within one year, such as accounts payable, short-term loans, and taxes owed.

Accounts Receivable Turnover

A measure of the liquidity of accounts receivable; computed by dividing net credit sales by average net accounts receivable.