A company's current ratio and an acid-test ratio are both greater than 1. Payment of an account payable would:
A)increase the current ratio but the acid-test ratio would not be affected.
B)increase the acid-test ratio but the current ratio would not be affected.
C)increase both the current and acid-test ratios.
D)decrease both the current and acid-test ratios.

Question

Quizplus · Accepted Answer

Paying an account payable reduces current liabilities, which increases both the current ratio and the acid-test ratio, as both ratios have current liabilities in the denominator.

A Company's Current Ratio and an Acid-Test Ratio Are Both