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CAIE IGCSE Business Studies 7.4 Liquidity Ratios Questions

Use this liquidity-ratios page to select the right ratio, exclude inventory where needed and present the answer as a ratio or number.

Syllabus
2027–2029
Course
Business 0264

Exam points

  • Calculate current ratio using current assets divided by current liabilities.
  • Calculate acid test ratio using current assets minus inventory, then divide by liabilities.
  • Present liquidity answers as a number or ratio to 1, matching the mark scheme.

Covered syllabus points

7.4.1—Current ratio7.4.2—Acid test ratio

Question 1

[Maximum number: 2]

WFT is a primary sector business which harvests timber (wood) from trees. The Operations Manager knows there are many legal controls over business activity affecting the environment. WFT has 30 employees and uses a lot of technology to process the timber. The business is always considering ways to increase added value. WFT often needs finance. An extract from WFT's statement of financial position is shown in Table 1.1.

Table 1.1

Table 1.1

Calculate WFT's current ratio in 2024. Show your working.

Working:

Final answer:

Question 2

[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:

Question 3

[Maximum number: 2]

HRO manufactures children's toys. It is a private limited company. The main objective of HRO 's shareholders is to increase profit. This might conflict with the objectives of other stakeholder groups, including its 30 suppliers. HRO's Managing Director knows that market research can help when making marketing decisions. The Finance Director is preparing HRO's statement of financial position. An extract is shown in Table 3.1.

Table 3.1

Table 3.1

Calculate HRO's current ratio. Show your working.

Working:
Final answer:

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