• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Liquidity ratio

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Liquidity ratio

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • December 16, 2021 at 2:57 pm #644414
    lookinout
    Participant
    • Topics: 6
    • Replies: 6
    • ☆

    The answer to the question below is A. The suggested explanation says “numerator and denominator of the liquidity ratio would both reduce by the same amount. Therefore the ratio would decrease.”

    But if numerator and denominator change by the same amount, won’t the ratio unchange?

    Q.A company has a liquidity ratio equal to 0.5. The directors believe that the company has to reduce its bank overdraft and have agreed to alter the company’s credit terms to customers from two months to one month.

    What would be the effects on the company’s cash operating cycle and liquidity ratio if this change were to be achieved?

    Cash operating cycle. Liquidity ratio
    A.decrease. Decrease
    B.decrease. No change
    C.decrease. increase
    D.increase.

    December 16, 2021 at 4:12 pm #644425
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51576
    • ☆☆☆☆☆

    The ratio will not start the same.

    Suppose the current assets are 100, and the current liabilities are 200. So the ratio is 0.5.

    Reduce both of them by 40 and see what happens to the ratio 🙂

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • baraka42 on PM Chapter 13 Questions Standard Costing and Basic Variance Analysis
  • baraka42 on PM Chapter 13 Questions Standard Costing and Basic Variance Analysis

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy