Liquidity (Edexcel A-Level Business): Quizzes
📚Quizzes
Practise the questions
10 questions from this quiz
ShowHide
Practise the questions
10 questions from this quiz
What does liquidity measure in a business?
What does liquidity measure in a business?
Ability to meet short-term debts
Which asset is the most liquid?
Which asset is the most liquid?
Cash
What is the formula for working capital?
What is the formula for working capital?
Current assets - Current liabilities
What is the fundamental accounting equation?
What is the fundamental accounting equation?
Assets = Capital + Liabilities
Within what timeframe are current assets converted to cash?
Within what timeframe are current assets converted to cash?
12 months
What is the formula for the current ratio?
What is the formula for the current ratio?
Current assets ÷ Current liabilities
What is generally considered a healthy current ratio range?
What is generally considered a healthy current ratio range?
1.5:1 to 2:1
What is the formula for the acid test ratio?
What is the formula for the acid test ratio?
(Current assets - Inventories) ÷ Current liabilities
Why are inventories excluded from the acid test ratio?
Why are inventories excluded from the acid test ratio?
Stock may not sell quickly
Can a profitable company still fail due to poor liquidity?
Can a profitable company still fail due to poor liquidity?
Yes, it's a common cause of failure