Which of the following would improve the financial position of a business? (A) Lower current ratio and lower accounts receivable turnover ratio (B) Higher current ratio and lower accounts receivable turnover ratio (C) Lower current ratio and higher accounts receivable turnover ratio (D) Higher current ratio and higher accounts receivable turnover ratio - HSC - SSCE Business Studies - Question 10 - 2013 - Paper 1

To determine which option would improve the financial position of a business, it’s important to understand the significance of the current ratio and accounts receivable turnover ratio.

1. Current Ratio: This ratio measures a company's ability to pay its short-term liabilities with its short-term assets. A higher current ratio indicates better liquidity, which is favorable for the financial position of a business.

2. Accounts Receivable Turnover Ratio: This ratio measures how efficiently a company collects its receivables. A higher accounts receivable turnover ratio indicates that the company is collecting receivables more quickly, which improves cash flow.

Considering the options:

• Option A and C both suggest lower current ratios, which would not improve liquidity.
• Option B has a higher current ratio but a lower accounts receivable turnover ratio, which may not optimize cash flow despite better liquidity.
• Option D offers a combination of a higher current ratio and a higher accounts receivable turnover ratio, signifying improved liquidity and efficient receivable management.

Based on these evaluations, the correct answer is (D) Higher current ratio and higher accounts receivable turnover ratio, as it optimally enhances both liquidity and cash flow efficiency.