Question 1

Section A

SteelWorks Manufacturing has the following balances:
Inventory: $50,000
Receivables: $80,000
Cash: $20,000
Payables: $60,000
Short-term overdraft: $20,000

Calculate the Quick Ratio (Acid Test Ratio). Enter your answer as a decimal to two decimal places (e.g., 1.50).

Accepted Answer

Quick Ratio = (Current Assets - Inventory) / Current Liabilities. Identify Current Assets (Receivables + Cash) and Current Liabilities (Payables + Overdraft).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Including inventory (calculating Current Ratio = 1.875) or forgetting to include the overdraft in liabilities.

Section A

SteelWorks Manufacturing has the following balances:
Inventory: $50,000
Receivables: $80,000
Cash: $20,000
Payables: $60,000
Short-term overdraft: $20,000

Calculate the Quick Ratio (Acid Test Ratio). Enter your answer as a decimal to two decimal places (e.g., 1.50).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 3

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