When examining whether a company has underrecorded accounts payable, all of the following ratios are helpful EXCEPT:
A) Quick assets/Current liabilities
B) Accounts payable/Purchases
C) Accounts payable/Cost of goods sold
D) Unearned revenue/Accounts payable

Question

Quizplus · Accepted Answer

Ratios A, B, and C are directly related to assessing the company's ability to manage and pay off its current liabilities and the efficiency in managing its inventory and purchases, which can indicate if accounts payable are underrecorded. Ratio D, unearned revenue to accounts payable, does not directly relate to the examination of underrecorded accounts payable as it measures the relationship between future revenue obligations and current obligations to suppliers, not the efficiency or accuracy of accounts payable recording.

When Examining Whether a Company Has Underrecorded Accounts Payable, All