What happens to the current ratio when an accounts payable is paid with cash?

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1236899

2026-03-05 01:40

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When an Accounts Payable is paid with cash, both current assets and current liabilities decrease by the same amount, as cash (a current asset) is reduced and accounts payable (a current liability) is also reduced. Consequently, the current ratio, which is calculated as current assets divided by current liabilities, remains unchanged. However, the overall liquidity position of the company may improve as it reduces its liabilities.

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