Page 124 - APM Integrated Workbook STUDENT S18-J19
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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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