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

Analysis and communication of accounting information — practice question

At 31 December 2016, Anna has collected the following information about Ravi, who may become a new customer.
(a(i))[2]

Calculate Ravi’s business current ratio, giving your answer to two decimal places.

(a(ii))[2]

Calculate Ravi’s business liquid (acid test) ratio, correct to two decimal places.

(a(iii))[3]

Calculate the inventory turnover rate for Ravi’s business.

(b)[5]

Advise Anna on which customer to choose. Justify your choice.

(c)[3]

State three limitations that a business faces when using ratio analysis.

Worked solution & mark scheme

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