IB Business Management SL 3.5.4 Improving liquidity ratios Question Bank

Explain one way VT could improve its liquidity.

Ways VT could improve liquidity include:
- attempt to operate with a lower re-order level of stock
- sell fixed assets and lease long-term assets
- pay less in dividends
- raise capital, either more share capital or long-term debt.

Accept any other acceptable and relevant means to improve liquidity.
If a candidate proposes negotiating longer trade terms with VT's creditors, award
[1]. This response is theoretically correct if all of the funds generated by the longer payment terms are used for no other purpose than building cash. Thus, while theoretically correct (the ATR would go up), it is not a particularly useful approach to the problem.
N.B. The question provides no real opportunity for application and thus application is not expected. However, a response must be relevant to receive full marks.