Question
If the trend of the current ratio is increasing, while
the trend of the acid-test ratio is decreasing over a period of time, this could be a warning that the firm is:Solution
When the trend of the current ratio (current assets divided by current liabilities) is increasing, it suggests that the firm's overall liquidity position is improving. On the other hand, when the trend of the acid-test ratio (quick assets divided by current liabilities) is decreasing, it indicates a decline in the firm's ability to meet its short-term obligations without relying on inventory. If the firm is depleting its inventories (option a), it would likely result in a decrease in both the current ratio and the acid-test ratio. Option b, having trouble collecting receivables, would mainly impact the accounts receivable turnover ratio but not necessarily the acid-test ratio. Option c, purchasing too much treasury stock, would not directly impact the liquidity ratios. Therefore, option d, carrying excess inventories, is the most appropriate warning indicated by the given trends. It suggests that the firm may have an inefficient inventory management system or that demand for its products has decreased.
If an article is marked 60% above the cost price. If discount of x% is given on the marked price of the article then final profit of 12% is obtained. No...
- If the total cost of 4 chairs and 7 tables is Rs. 410 and the total cost of 3 chairs and 5 tables is Rs. 300, then find the cost of 6 chairs.
Profit percentage earned on selling article 'E' is the same as the percentage loss incurred on selling article 'F'. If the cost price of article 'E' is ...
A seller marked an item above its cost price and allows a discount of 25% on it. On the discounted price, the seller charges a packaging price which is ...
The cost price per kg of sugar types 'X' and 'Y' is Rs. 80 and Rs. 150 respectively. These are blended to form a mixture which is sold at Rs. 184 per kg...
A shopkeeper sold two articles for Rs. 3588 each. One article is sold at a profit of 15% while another one is sold at a loss of 20%. What will be the su...
A man bought 18 glasses for Rs.12 and sold 12 glasses for Rs 18. What is the profit percent?
A man sold an article for 20% profit. If the cost price of the article was 'y%' less, then he would've earned 50% profit by selling the article at the s...
Arjun sold two laptop bags, one with a 20% profit and the other with a 25% profit. The marked price of each bag is Rs. 1,500, and...
A shopkeeper bought an article for Rs. 180. He sold it at profit 30% after allowing a discount of 40%. If instead he had sold it at 20% discount, then f...