Using the data in Extract B, calculate the difference in Morrisons’ acid test ratio between 2014 and 2015. You are advised to show your working. Extract B Selected information from Morrisons’ 2015 Annual Report 2015 (£m) 2014 (£m) Current assets: Inventory (stock) 658 852 Debtors 239 316 Cash 241 261 Total current assets 1138 1429 Total current liabilities 2273 2873 Pre-tax profit 217 792 (Source: adapted from http://www.morrisons-corporate.com/ar2015/pdf/Morrisons_AR_2014_Financial_statements.pdf)

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Using the data in Extract B, calculate the difference in Morrisons’ acid test ratio between 2014 and 2015 - Edexcel - A-Level Business - Question 1 - 2017 - Paper 2

Question 1

Using the data in Extract B, calculate the difference in Morrisons’ acid test ratio between 2014 and 2015. You are advised to show your working. Extract B Selected ... show full transcript

Worked Solution & Example Answer:Using the data in Extract B, calculate the difference in Morrisons’ acid test ratio between 2014 and 2015 - Edexcel - A-Level Business - Question 1 - 2017 - Paper 2

Step 1

Calculate for 2014

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Answer

To find the acid test ratio for 2014, we use the formula:

$\text{Acid Test Ratio} = \frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}}$

Substituting the values for 2014:

$\text{Acid Test Ratio} = \frac{1429 - 852}{2873} = \frac{577}{2873} \approx 0.20:1$

Step 2

Calculate for 2015

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Answer

Now, for 2015, we apply the same formula:

$\text{Acid Test Ratio} = \frac{1138 - 658}{2273} = \frac{480}{2273} \approx 0.21:1$

Step 3

Calculate the difference

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Answer

Finally, we calculate the difference between the acid test ratios for 2015 and 2014:

$0.21 - 0.20 = 0.01$

Thus, the difference in Morrisons’ acid test ratio between 2014 and 2015 is 0.01.

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