Current Ratio 0.0 / 5 ? Business StudiesBusiness PlansA2/A-levelAQA Created by: nareen.lawkCreated on: 12-03-19 14:57 What do liquidity ratios measure? They assess whether a business has sufficient cash or equivalent current assets to be able to pay its debts as they fall due 1 of 10 How do you calculate current ratio? Current Assets/Current Liabilities 2 of 10 What does a ratio of 1.5-2 show? Acceptable level of liquidity and efficient management of working capital 3 of 10 What does a low ratio (well below 1) show? Liquidity issues 4 of 10 What does a high ratio (well above 2) show? Possibly too much working capital tied up in inventories or debtors 5 of 10 Explain what a current ration of 2.2:1 means For every £1 of debt, the business has £2.20 in assets 6 of 10 Where can the current ratio be found? On the balance sheet 7 of 10 Identify 3 assets of a business Stock, cash, debtors (money owed to them) 8 of 10 Identify 2 current liabilities of a business Creditors, overdraft 9 of 10 Why is a bank loan not a current liability? Because it does not have to be repayed within 12 months 10 of 10
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