Q 1: Statement of Financial Position Entity: Non-current assets Current assets Inventory Accounts receivable Bank Less : Current liabilities Accounts payable Equity Capital Add : Profit Less : Drawings Additional information: Additional information: Opening inventory = Sales = Purchases = A $ 30,000 45,000 15,000 90,000 30,000 $ 40,000 B $ 50,000 9,000 1,000 60,000 30,000 $ 70,000 1. Compute the accounting ratios: A B (i) Current ratio (ii) Acid test ratio (iii) Inventory turnover (iv) Inventory turnover period (v) Accounts receivable days (vi) Accounts payable days 2. Explain the purpose of the ratios computed in question. 3. Comment on the trend of these ratios and provide one recommendation to improve the company's liquidity. 1 Q 1: Statement of Financial Position Entity: Non-current assets Current assets Inventory Accounts receivable Bank Less : Current liabilities Accounts payable Equity Capital Add : Profit Less : Drawings Additional information: Additional information: Opening inventory = Sales = Purchases = A $ 30,000 45,000 15,000 90,000 30,000 $ 40,000 B $ 50,000 9,000 1,000 60,000 30,000 $ 70,000 1. Compute the accounting ratios: A B (i) Current ratio (ii) Acid test ratio (iii) Inventory turnover (iv) Inventory turnover period (v) Accounts receivable days (vi) Accounts payable days 2. Explain the purpose of the ratios computed in question. 3. Comment on the trend of these ratios and provide one recommendation to improve the company's liquidity. 1