ACCA · Question 64 · Ratio Analysis

SCENARIO: AgriSteel Heavy Industries manufactures specialized farming machinery. Draft financial statements for the year ended 30 September 20X6 show a draft net profit of $1,200,000. The following adjustments are needed:

1. Closing inventory was valued at cost $450,000, but includes damaged tractors costing $50,000 that can only be sold for $30,000 after $5,000 repair costs.
2. A machine bought for $200,000 on 1 Oct 20X5 was incorrectly charged to repairs. Depreciation is 20% reducing balance.
3. A provision for a legal claim of $80,000 needs to be created.
4. The allowance for receivables needs to increase by $15,000.

What does a declining Quick Ratio over several years indicate about AgriSteel?