FC L4 P2

Formula: Current assets/Current

liabilities

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OFF

Answer explanation

Current ratio

otherwise known as the

working capital ratio,

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OFF

Answer explanation

Current ratio

measures the

ability of a business to meet its

short-term obligations that are due

within a year.

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OFF

Answer explanation

Current ratio

Avery high

_ may mean there is excess

cash that should possibly be invested

elsewhere in the business or that there

is too much inventory. Most believe that

a ratio between 1.2 and 2.0 is sufficient

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OFF

Answer explanation

Current ratio

Generally acceptable current ratio

is .

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OFF

Answer explanation

2:1

Quick ratio

Formula:

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OFF

Answer explanation

Cash+Marketable

securities+Accounts receivable

net/Current asset

also known as the acid-test

ratio

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Answer explanation

Quick ratio

measures the ability of a business

to pay its short-term liabilities by having

assets that are readily convertible into

cash

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OFF

Answer explanation

Quick ratio

These assets are considered

“quick” assets because they can be

quickly and easily converted into cash.

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OFF

Answer explanation

These assets are cash,

marketable securities, and accounts

receivable.

A ratio of 1:1 means that

a social enterprise can pay its bills

without having to sell inventory.

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OFF

Answer explanation

quick ratio