Financial Reporting and Analysis Q201
0. The current ratio for an industry is 2.4. Data for a firm in the industry is presented below:
| As on December 31 | £ ‘000s |
| cash | 120 |
| Accounts receivable | 400 |
| Inventory | 1400 |
| Accounts payable | 350 |
| Taxes payable | 250 |
| Installment loan payable, due in three equal annual payments on June 30. | 600 |
As compared to the industry, the company is:
- Option : A
- Explanation : Current ratio = Current assets ÷ Current liabilities
Current ratio = 2.4
This is the same as the current ratio of the industry. Hence we can say that the company is as liquid as the industry.
