 # Cash ratio/Quick ratio

hi if a company reduces a/c payable with cash payment.rest other things are same. what will be effect on cash ratio and quick ratio? answer cash ratio Decrease Quick ratio Increase. Please explain … many thanks cheers abhi

Not possible to say without indicating whether the existing ratios are > 1 or < 1.

if a company reduces a/c payable with cash payment od 2 mn \$.rest other things are same. what will be effect on cash ratio and quick ratio? cash ratio:.4/1 quick ratio:1.2/1 answer cash ratio Decrease Quick ratio Increase.

Just do the math: cash ratio Increase Quick ratio Increase.

As Dreary wrote, the key fact in this case is the value of the appropriate ratio. Suppose you have only cash and trade payables and a quick ratio of 2/3 (2 in cash, 3 in payables). Transferring 1 from cash to settle an outstanding payable will result in a lower ratio of 1/2. On the other hand, if you have a ratio of 4/3 the same transaction will increase the value (from 4/3 to 3/2). Cheers, Milos