Asked by
Brody Arrington
on Oct 09, 2024Verified
If the acid-test ratio is less than one, then paying off some current liabilities with cash will increase the acid-test (quick)ratio.
Acid-Test Ratio
A financial metric that measures a company's ability to pay off its current liabilities with its most liquid assets, excluding inventory.
Current Liabilities
Short-term financial obligations that are due within one year or within a company's operating cycle, whichever is longer.
- Gain an understanding of liquidity principles and the effects of transactions thereon.
Verified Answer
AG
Learning Objectives
- Gain an understanding of liquidity principles and the effects of transactions thereon.