2.3.2 Liquidity

Question 1

define assets

Answer 1

owned by business

Question 2

define liability

Answer 2

owed by business

Question 3

define liquidity

Answer 3

ability of a business to turn its assess into cash to pay its current liabilities

Question 4

list statements

Answer 4

• profit and loss income statements
• gross profit, net profit, op
• balance sheets

Question 5

define non current

Answer 5

over 12 months changes

Question 6

define current

Answer 6

changes under 12 months

Question 7

example current assets

Answer 7

stock

Question 8

example non current assets

Answer 8

land and property

Question 9

example liability non current

Answer 9

loan, mortgage

Question 10

example liability current

Answer 10

overdraft, trade-credit

Question 11

current ratio formula

Answer 11

current assets divided by current liabilities

Question 12

acid test ratio formula

Answer 12

current assets - inventory divided by current liabilities

Question 13

ways liquidity can be improved

Answer 13

• reduce amount of stock it holds
• reduce credit period offered to customers
• pay suppliers later on

Question 14

define working capital

Answer 14

day to day finance needed to trade in a business.

Question 15

working capital formula

Answer 15

current assets - current liabilities

Question 16

working capital cycle

Answer 16

cash - cash paid by debtors for goods and services bought
sales - stock purchased from suppliers on credit