Session 43/44 - liquidity and working capital

Question 1

What is a liquidity ratio

Answer 1

Assess whether a business has sufficient cash or equivalent current assets to be able to pay its debts as they fall due

Question 2

What is liquidity determined by

Answer 2

Current assets and current liabilities

Question 3

What is the current ratio formula

Answer 3

Current assets/current liabilities

Question 4

What ratio is considered acceptable and efficient liquidity

Answer 4

1.5-2.5

Question 5

What is a statement of comprehensive income

Answer 5

Measures the businesses performance over a given period of time and compares income and cost of the business

Question 6

What is a statement of financial position

Answer 6

Snapshot of the businesses assets and it’s liabilities on a particular day

Question 7

What is a cash flow statement

Answer 7

Shows how the business has generated and disposed of cash during a period

Question 8

What are current assets

Answer 8

Assets expected to be turned in to cash in under one year