WorksheetsLiquidity Ratios Quiz
Total questions: 6
Worksheet time: 6mins
Which is the correct formula for the Current Ratio?
Current Assets ÷ Current Liabilities
(Current Assets – Inventory) ÷ Current Liabilities
Net Profit ÷ Sales
Current Liabilities ÷ Current Assets
The Acid-Test (Quick) Ratio formula is:
Current Assets ÷ Current Liabilities
(Current Assets – Inventory) ÷ Current Liabilities
Current Assets ÷ Owner’s Equity
Gross Profit ÷ Sales
If the Current Ratio = 2:1, it means:
The business owes R2 for every R1 of assets
The business has R2 in assets for every R1 owed
The business has twice as many liabilities as assets
The business has no liquidity problems
Why is inventory excluded from the Acid-Test Ratio?
It is not an asset
It does not generate profit
It cannot always be quickly converted to cash
It is part of liabilities
A business has: Current Ratio = 2:1 Acid-Test Ratio = 0.7:1 What does this suggest?
The business is highly liquid
The business can only pay debts if it sells stock
The business has no creditors
The business has too much cash
If a business’s Current Ratio is high (5:1) but its Acid-Test is low (0.8:1), what might this mean?
