CAIE IGCSE Business Studies 7.4 liquidity ratios
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. Liquidity ratios question 1
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
Calculate WFT's current ratio in 2024. Show your working.
Working:
Final answer:
7.4. Liquidity ratios question 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
Calculate WFH's acid test ratio for 2022. Show your working.
Working:
Final answer:
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