Liquidity

Question 1

Formula linking Assets, Capital, and Liabilities

Answer 1

Assets = Capital + Liabilities

Question 2

Current Ratio formula

Answer 2

Current assets/Current liabilities

Question 3

Net assets

Answer 3

Total assets - Total liabilities

Question 4

Acid test ratio

Answer 4

(Current assets - Inventories)/Current liabilities

Question 5

Working capital

Answer 5

Funds left over to pay business’s day-to-day expenses,

after current debts = paid

Question 6

Working capital formula

Answer 6

Current assets - Current liabilities

Question 7

Shareholder’s equity

Answer 7

Amount of money owed to shareholders by business

Question 8

2 examples of shareholder’s equity

Answer 8

Share capital

Retained profit

Question 9

Non-current assets

Answer 9

Long-term resources
-used repeatedly over period of time
‘fixed assets’
includes intangible assets

Question 10

Non-current asset examples

Answer 10

Land, Property
Equipment, Vehicles
Fixtures, Fittings

Question 11

What does capital employed mean?

Answer 11

Total capital

Question 12

Liquidity

Answer 12

How easily an asset can be converted into cash

Question 13

Current assets

Answer 13

Liquid assets which will be changed into cash within the next 12 months

Question 14

Examples of current assets

Answer 14

Inventories - e.g. stocks of raw materials

Receivables - e.g. debtors