liquidity and solvency ratios

State the following statement is True or False.

Ratios help in comparisons of a firm’s results over a number of accounting periods as well as with other business enterprises.

• True

• False

State the following statement is True or False.

A ratio reflects quantitative and qualitative aspects of results.

• True

• False

The _________ of business firm is measured by its ability to satisfy its short term obligations as they become due:

• Activity

• Liquidity

• profitability

• Solvency

The two basic measures of liquidity are:

• inventory turnover and current ratio

• current ratio and liquid ratio

• gross profit Ratio and operating ratio

• current ratio and average collection period

The _________ is a measure of liquidity which excludes _______, generally the least liquid asset:

• Current ratio, trade receivable

• Liquid ratio, trade receivable

• Current ratio, inventory

• Liquid ratio, inventory

State the following statement True or False.

Ratios help in comparisons of a firm’s results over a number of accounting periods as well as with other business enterprises.

• True

• False

The acid test ratio is also known as .....

• Current ratio

• Quick/ Liquid ratio

• Holding ratio

• Operating ratio

Which ratio tells us if a business might struggle to pay off its short term debts if they cannot sell off their inventory quickly?

• Acid test (quick) ratio

• Current ratio

• Gross profit margin

• ROCE

Which of these statements are correct for Sally's Ice cream parlour? (select two only!)

• Acid test ratio is 1.2:1

• Current ratio is 1:1

• Current ratio is 3:1

• Acid test ratio is 1:1

• Current ratio is 2:1

A current ratio given as 2:1 for a business means....

• The business has £2 of current assets

• The business has double current assets than current liabilities

• The business has £2 of current assets for every £1 of current liabilities