Edexcel Business Unit 2, Topic 3 Test

the ease with which assets can be counted as current

the ease with which assets can be converted into cash

the ratio of conversion from fixed assets to cash

assets that will be converted into cash within 1 year

Inventories are costly to keep

If a business has too much trade receivables, it won't be able to pay due invoices

Cash is very unlikely to be earning very high rates of interest

Having cash as much as possible would be safer for the business

Non-current ratio

Current ratio

Asset test ratio

Acid test ratio

repay its liabilities with its assets

liquify its assets to pay long-term debts

repay receivables with its current assets

sustain the business for the next 2 years

current liabilities : current assets

(current assets - inventory) : current liabilities

current assets : current liabilities

(current liabilities - current assets) : inventory

0.67 : 1

0.08 : 1

0.97 : 1

1.03 : 1

(current assets - inventory) : current liabilities

current assets : current liabilities

(current liabilities - inventory) : current assets

(current assets - current liabilities) : inventory

0.97 : 1

0.67 : 1

1.03 : 1

0.08 : 1

1:1 and 1.5:1

1.5:1 and 2:1

2:1 and 2.5:1

2.5:1 and 3:1

above 1:1

below 1:1

at or above 1:1

at or below 1:1