A business has a current ratio of 2:1 and an asset test ratio of 1,5:1. The business has a risk seeking attitude towards risk and is considering a risk retention programme. With due consideration of these ratios and the intention of the business, indicate the correct statement below: 1 A higher level of loss assumption based on working capital guidelines is possible. 2 The business is not in a good position to handle current liabilities. 3 The current ratio is indicative of an illiquid working capital position. 4 The ratios of the business are not favourable for a risk retention programme.
A business has a current ratio of 2:1 and an asset test ratio of 1,5:1. The business has a risk seeking attitude towards risk and is considering a risk retention programme. With due consideration of these ratios and the intention of the business, indicate the correct statement below: 1 A higher level of loss assumption based on working capital guidelines is possible. 2 The business is not in a good position to handle current liabilities. 3 The current ratio is indicative of an illiquid working capital position. 4 The ratios of the business are not favourable for a risk retention programme.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 10
A business has a
1 A higher level of loss assumption based on
2 The business is not in a good position to handle current liabilities.
3 The current ratio is indicative of an illiquid working capital position.
4 The ratios of the business are not favourable for a risk retention programme.
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