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financial_ratios_worksheet_with_guidance.pdfWhat are some examples of current assets? (trade recievables)
What are some examples of current liabilities? (trade payables)
Same for non-current assets and liabilities?
What is current ratio?
How do we calculate it?
What should it be?
Example question:
Item
$
Inventory 18,000
Trade Receivables 12,000
Cash at Bank 6,000
Trade Payables 15,000
Bank Overdraft 5,000
a) Calculate the current ratio for ABC Sportswear Ltd. Show your workings. [3]
b) Explain what the result of your calculation suggests about the liquidity of the business. [4]
c) Recommend two actions the business could take to improve its current ratio. Justify your answer. [6]
What is acid-test ratio?
How do we calculate it?
What should it be?
Item
$
Inventory
30,000
Trade Receivables
18,000
Cash at Bank
12,000
Trade Payables
20,000
Bank Overdraft
10,000
a) Calculate the acid-test ratio for GreenTech Electronics Ltd. Show your workings. [3]
b) Explain what your answer suggests about the business's ability to meet its short-term liabilities. [4]
c) Recommend two ways GreenTech Electronics Ltd could improve its acid-test ratio. Justify your answer. [6]
FreshBake Ltd produces and sells cakes to local supermarkets.
The following information is available for the year ended 31 December 2025:
Item
$
Revenue (Sales)
250,000
Cost of Sales
175,000
a) Calculate the gross profit margin for FreshBake Ltd. Show your workings. [3]
b) Explain what your answer suggests about the profitability of the business. [4]
c) Recommend two ways FreshBake Ltd could improve its gross profit margin. Justify your answer. [6]
Urban Furniture Ltd manufactures and sells office furniture.
The following information is available for the year ended 31 December 2025:
Item
$
Revenue (Sales)
400,000
Gross Profit
120,000
Operating Expenses
80,000
a) Calculate the net profit margin for Urban Furniture Ltd. Show your workings. [3]
b) Explain what your answer suggests about the profitability of the business. [4]
c) Recommend two ways Urban Furniture Ltd could improve its net profit margin. Justify your answer. [6]
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