Financial manangment Notes- Page21-Overtrading Illustration 1

JJessie5y ago

Hi, According to the question/example, even though the company spent $500 long-term equity into Fixed asset, the current ratio based on the given information will be sitll more than 1 (350/150 =2.33). Why in the comment as given example says, "in this case the company has severe liquidity issues"? I thought the lecture notes indicates clearly only when ratio less than 1. Please advise. Thank you.

John MoffatTutor5y ago#1

You obviously have not watched the lecture that goes with the chapter because I explain why they will have liquidity problems (and the current ratio will not be 2.33). There is no point at all in using the notes without watching the lectures - they are only lecture notes, not a Study Text, and it is in the lectures that I work through the examples, and explain and expand on the notes. If you are not watching the lectures for any reason then you must buy a Study Text from one of the ACCA approved publishers and study from there.

JJessie5y ago#2

Thanks for your reminder, I watched the lecture now and I understand.

John MoffatTutor5y ago#3

That's great :-)

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