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CAIE IGCSE Business Studies 5.5.2 Liquidity

Practise interpreting liquidity by using current and acid test ratios to judge whether a business can meet short-term commitments.

Syllabus
2027–2029
Course
Business 0264

Exam points

  • calculate current or acid test ratios from appendix data and judge the financial position
  • explain why liquidity matters for paying suppliers, wages or short-term debts in the case

5.5.2—Liquidity question 1

[Maximum number: 4]

AHG is an established business as it has been operating for a long time. It sells garden products including plants and flowers. AHG uses competitive pricing. The business has 4 managers and 30 other employees. All AHG's managers use delegation. The Finance Manager is analysing AHG's statement of financial position as she is interested in its liquidity. An extract is shown in Table 1.1.

Table 1.1

Table 1.1

Outline two possible reasons why liquidity is important to AHG.

Reason 1:
Reason 2:

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