a) State the formula for calculating the current ratio - HSC - SSCE Business Studies - Question 23 - 2005 - Paper 1
Question 23
a) State the formula for calculating the current ratio.
b) State ONE reason for the change in the net profit ratio for Maurice’s Trading Company, and propose ONE st... show full transcript
Worked Solution & Example Answer:a) State the formula for calculating the current ratio - HSC - SSCE Business Studies - Question 23 - 2005 - Paper 1
Step 1
State the formula for calculating the current ratio.
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Answer
The formula for calculating the current ratio is given by:
Current Ratio=Current LiabilitiesCurrent Assets
This ratio measures a company's ability to cover its short-term obligations with its short-term assets.
Step 2
State ONE reason for the change in the net profit ratio for Maurice’s Trading Company, and propose ONE strategy to deal with this situation.
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Answer
One reason for the change in the net profit ratio for Maurice’s Trading Company could be an increase in operating expenses, which may have reduced overall profitability.
To address this issue, a proposed strategy could involve reviewing and reducing operational costs. This could be achieved through
Establishing cost control measures,
Streamlining operations,
Implementing efficiency initiatives to minimize waste and enhance productivity.