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Ratios

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Ratios

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by MikeLittle.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • June 4, 2017 at 5:55 pm #390291
    Arooba
    Member
    • Topics: 58
    • Replies: 45
    • ☆☆

    One of the question says that in order to increase the current ratio, company should
    Make an early payment to suppliers, even though the amount is not due. How could this be? If the company makes an early payment to suppliers, won’t that reduce its cash?

    these were the rest of the options. According to me it should be the bulk purchase of inventory since that increases the current assets which will result in increased current ratio

    Return some inventory which had been purchased for cash and obtain a full refund on the cost

    Make a bulk purchase of inventory for cash to obtain a large discount

    Offer early payment discounts in order to collect receivables more quickly

    June 4, 2017 at 6:38 pm #390307
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23333
    • ☆☆☆☆☆

    Imagine current assets:

    Inventory 500
    Receivables 400
    Cash 600

    Total current assets 1,500

    Payables 700

    Current ratio 2.14:1

    Now pay 300 of those payables

    Current assets fall to 1,200, payables fall to 400

    Current ratio 3:1

    You should get used to this technique … make up figures and then try your solutions with these pretend amounts

    OK?

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • The topic ‘Ratios’ is closed to new replies.

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