State the formula for calculating the current ratio - HSC - SSCE Business Studies - Question 23 - 2005 - Paper 1
Question 23
State the formula for calculating the current ratio.
State ONE reason for the change in the net profit ratio for Maurice’s Trading Company, and propose ONE strategy... show full transcript
Worked Solution & Example Answer: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 current ratio is calculated using the formula:
Current Ratio=Current LiabilitiesCurrent Assets
This formula provides a measure of 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.
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One reason for the change in the net profit ratio could be an increase in operating expenses. As expenses rise, they can significantly impact the profitability ratio, leading to a lower net profit margin.
Step 3
Propose ONE strategy to deal with this situation.
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One strategy to address the increased expenses could be to implement cost control measures. This might include reviewing all operational costs, identifying non-essential expenses, and finding ways to reduce costs without compromising on product quality or service.
