Accounting (AS)·Ratios & interpretation · NSSCAS 4.1.1
Liquidity ratios & working capital
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Can the business pay what is due soon? In this lesson you calculate working capital, the current ratio and the acid test ratio, and watch exactly how everyday transactions push them up or down. Ratio work appears in the structured questions of both papers, and examiners love asking you to comment and recommend - so we practise that too.
What you'll learn in this lesson
By the end you should be able to (NSSCAS Accounting (AS) 4.1.1):
- calculate and analyse liquidity ratios: current ratio, quick/liquid/acid test ratio
- calculate and show the effects of transactions on working capital
- make suggestions and recommendations for improving profitability, liquidity and working capital
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Miss Olivia and Mike talk through the whole topic — with the figure and working drawn live.