Accounting 9706 · AS & A Level · Analysis and communication of accounting information

Analysis and communication of accounting information — practice question

The information below has been taken from the financial statements of Thaw Limited at 31 December 2015.
(a(i))[1]

Current ratio, stated to two decimal places.

(a(ii))[1]

Liquid (acid test) ratio, stated to two decimal places.

(a(iii))[1]

Trade receivables turnover, expressed in days.

(a(iv))[1]

Trade payables turnover, expressed in days.

(a(v))[1]

Inventory turnover, expressed in days.

(b)[4]

Discuss the ratios calculated in part (a) in relation to Thaw Limited’s liquidity and comment on the overall position.

(c)[6]

Explain three limitations of ratio analysis.

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