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

Question

Quizplus · Accepted Answer

Paying off current liabilities with cash decreases both current liabilities and current assets (cash), but since cash is part of the quick assets, the numerator in the acid-test ratio decreases, potentially leaving the ratio unchanged or even lower, not necessarily increasing it.

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