FSs Characteristics for Interpretation

Question 1

What are liquid assets?

Answer 1

Current assets items that will or could soon be converted into cash

Question 2

What are liquid funds?

Answer 2

Cash
Short-term investments
Fixed term deposits with a bank
Trade receivables
Bill of exchange receivable

Question 3

What does a low asset turnover suggest?

Answer 3

A capital intensive industry

Question 4

What does high percentage of depreciation mean?

Answer 4

That a business has a large amount of non-current assets

Question 5

Effect purchasing inventory on credit has on quick and current ratio?

Answer 5

Causes them to decrease

Question 6

What effect does impairment have on capital employed?

Answer 6

Causes a decrease, but increases its ROCE

Question 7

What effect does impairment have on gearing?

Answer 7

Reduces equity