Calculate and interpret ACCA FA ratios
A ratio earns its value through interpretation. Calculate it accurately, compare it with a meaningful benchmark, then explain the likely cause.
- ✓Profitability measures returns and margins
- ✓Liquidity measures short-term payment capacity
- ✓Efficiency ratios connect activity to working capital and assets
Worked question
Current assets are €90,000 and current liabilities are €60,000. What is the current ratio?
- A. 0.67:1
- B. 1.5:1
- C. 2:1
- D. €30,000
Answer: 1.5:1
The current ratio is current assets divided by current liabilities. €90,000 divided by €60,000 equals 1.5:1.
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