10 - Liquidity Flashcards
1
Q
What ratios can be used to assess a business’s financial performance?
A
Financial ratios
2
Q
What does the calculation of “current ratio” allow a business to do?
A
Explore its liquidity
3
Q
What is the formula for “current ratio”?
A
Current Assets / Current Liabilities
4
Q
What does the “acid test ratio” measure and discount?
A
Liquidity, but discounts stock
5
Q
What is the formula for “acid test ratio”?
A
(Current Assets - Stocks) / Current Liabilities
6
Q
What is the “current ratio” if current assets are £4m and current liabilities are £800k?
A
5
£4m / £0.8m
