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D076 – Ratios Question and answers correctly solved 2025/2026

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D076 – Ratios Question and answers correctly solved 2025/2026 Current Ratio - correct answer Is a liquidity ratio. Short-term debt paying ability. Current Assets/Current Liabilities Quick Ratio - correct answer Also known as acid test. Is a liquidity ratio. Provides a more accurate cash position of firm by excluding inventory from current assets. Current Assets-Inventory/Current Liabilities AR Turnover - correct answer Is an activity/asset management ratio. Helps to identify how quickly these accounts receivables turn over during a given year. A rate of 12 indicated that the company is collecting once a month. If less or decreasing then it may indicate that the company is taking longer to collect. Credit Sales/Accounts Receivable Average Collection Period (ACP) - correct answer Is an activity ratio. Convert AR turnover into a day count measure. 365/AR Turnover

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D076 – Ratios Question and answers
correctly solved 2025/2026
Current Ratio - correct answer ✔Is a liquidity ratio. Short-term debt paying ability.



Current Assets/Current Liabilities



Quick Ratio - correct answer ✔Also known as acid test. Is a liquidity ratio. Provides a more accurate
cash position of firm by excluding inventory from current assets.



Current Assets-Inventory/Current Liabilities



AR Turnover - correct answer ✔Is an activity/asset management ratio. Helps to identify how quickly
these accounts receivables turn over during a given year. A rate of 12 indicated that the company is
collecting once a month. If less or decreasing then it may indicate that the company is taking longer to
collect.



Credit Sales/Accounts Receivable



Average Collection Period (ACP) - correct answer ✔Is an activity ratio. Convert AR turnover into a day
count measure.



365/AR Turnover



Inventory Turnover - correct answer ✔Is an activity ratio. Measures the efficient use of inventories. A
high number may indicate whether there is enough product on hand; a lower number may indicate it's
taking too long to turnover inventory.

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