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a) State the formula for calculating the current ratio - HSC - SSCE Business Studies - Question 23 - 2005 - Paper 1

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a) State the formula for calculating the current ratio. b) State ONE reason for the change in the net profit ratio for Maurice’s Trading Company, and propose ONE st... show full transcript

Worked Solution & Example Answer:a) State the formula for calculating the current ratio - HSC - SSCE Business Studies - Question 23 - 2005 - Paper 1

Step 1

State the formula for calculating the current ratio.

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Answer

The formula for calculating the current ratio is given by:

Current Ratio=Current AssetsCurrent Liabilities\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}

This ratio measures a company's ability to cover its short-term obligations with its short-term assets.

Step 2

State ONE reason for the change in the net profit ratio for Maurice’s Trading Company, and propose ONE strategy to deal with this situation.

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Answer

One reason for the change in the net profit ratio for Maurice’s Trading Company could be an increase in operating expenses, which may have reduced overall profitability.

To address this issue, a proposed strategy could involve reviewing and reducing operational costs. This could be achieved through

  • Establishing cost control measures,
  • Streamlining operations,
  • Implementing efficiency initiatives to minimize waste and enhance productivity.

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