Trimester Tinker Limited has the following working capital items in its balance sheet at 31 December 20X1:
Question:
Trimester Tinker Limited has the following working capital items in its balance sheet at 31 December 20X1:
ie Stock 108 770 Debtors 94 300 Cash in hand 1 600 Trade creditors 110 650 The company belongs to a trade association that has recently published industry averages for key financial ratios based upon a survey of its members. The industry averages for current and quick ratios applicable to the business of Trimester Tinker Limited are:
CHAPTER 13 UNDERSTANDING FINANCIAL REPORTS: USING ACCOUNTING RATIOS | 307 Current ratio = 1.62:1 Quick ratio = 0.93:1 Which of the following statements is correct?
a) Trimester Tinker Limited’s current ratio is higher than the industry average and its quick ratio is also higher.
b) Trimester Tinker Limited's current ratio is higher than the industry average but its quick ratio is lower.
c) Trimester Tinker Limited’s current ratio is lower than the industry average and its quick ratio is also lower.
d) Trimester Tinker Limited’s current ratio is lower than the industry average but its quick ratio is higher.
Step by Step Answer:
Financial Accounting For Non Specialists
ISBN: 9781844802050
2nd Edition
Authors: Catherine Gowthorpe