assignment ratios

Question 1

A reason for a difference in a current ratio

Answer 1

Sell off unwanted non-current assets (increase)
Purchased new non-current assets (decrease)

Question 2

A reason for a difference in a gross profit ratio

Answer 2

Increase the selling price (increase)
Decrease selling price (decrease)

Question 3

A reason for a difference in a trade receivables collection period

Answer 3

Offer customers cash discount to encourage prompt payment (decrease)
No longer offering cash discount to customers so they are taking longer to pay (increase)

Question 4

A way of improving rate of inventory turnover

Answer 4

Increase the quantity sold by having an advertising campaign.

Question 5

A way of improving acid test ratio

Answer 5

Offer discounts and special offers to increase the quantity sold.

Question 6

A way of improving trade payables payment period

Answer 6

Reduce expenses e.g. find a cheaper electricity supplier.

Question 7

Average Inventory

Answer 7

(Opening Inventory + Closing Inventory) / 2

Question 8

Current Assets

Answer 8

Closing Inventory + (Trade Receivables–Provision for Bad Debts) + Cash and Cash Equivalents + Expenses receivable

Question 9

Current Liabilities

Answer 9

Trade Payables + Cash and Cash equivalents overdraft + Expenses payable