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.

Question

Quizplus · Accepted Answer

Paying off accounts payable with cash reduces current liabilities, which increases both the quick ratio and current ratio.

If a Company Uses Cash to Pay Off Some of Its