2.3.2 Flashcards
1
Q
What is meant by ‘liquidity’?
A
A measure of a firms short term survival
2
Q
What are 2 liquidity ratio’s?
A
- Current ratio
- Acid test ratio
3
Q
What is the current ratio?
A
Current assets : current liabilities
4
Q
What is the acid test ratio?
A
Liquid assets : current liabilities
5
Q
What is meant by ‘working capital’?
A
A measure of a firm’s liquidity / ability to meet day to day expenses
6
Q
How do you calculate working capital?
A
Current assets - current liabilities
7
Q
What is a statement of financial position (balance sheet)?
A
A formal financial document that summarises the net worth of a business at a given point in time
