Page 124 - APM Integrated Workbook STUDENT S18-J19
P. 124

Chapter 8





                  Illustrations and further practice



                  Now try TYU questions 2, 3, 4 and 6 and read Illustrations 2 and 3 from Chapter
                  8 of the Study Text.


               2.3 Measuring liquidity

                                  Liquidity needs to be considered alongside profitability.


                                  Need to ensure organisation can meet its short-term obligations.



                             Measures

                                  Current ratio = current assets ÷ current liabilities.


                                  Acid test = (current assets – inventories) ÷ current liabilities.

                                  Inventory period = (average inventory ÷ cost of sales) × 365.

                                  Receivables period = (average receivables ÷ sales) × 365.

                                  Payables period = (average payables ÷ purchases) × 365.




































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