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CAIE IGCSE Business Studies 7.4.2 acid test ratio

Practise acid-test-ratio questions by subtracting inventory, dividing by current liabilities and presenting the result clearly.

Syllabus
2027–2029
Course
Business 0264

Exam points

  • Subtract inventory from current assets before dividing by current liabilities.
  • Show working such as (60-40)÷30 or (current assets-inventory)÷liabilities.
  • Present the result as a ratio to 1 or as a number, such as 0.5:1 or 0.67.

7.4.2—Acid test ratio question 1

[Maximum number: 2]

WFH produces hats and sells them to a mass market. It holds a high level of inventory. The Managing Director is concerned about the liquidity of the business and has been analysing WFH's financial statements. An extract is shown in Table 2.1. The Managing Director thinks that the business might fail. Other stakeholder groups might also be interested in WFH's financial statements.

Table 2.1

Table 2.1

Calculate WFH's acid test ratio for 2022. Show your working.

Working:
Final answer:

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