Accounting Multiple Choice Question – 16 November 2020

The table shows an extract from a company’s accounts for the year ended 31 December 2019.

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What do these figures show about the company’s liquidity?

Select ONE answer:

1. It declined in year 2, but no further in year 3. 
2. It declined in year 2, but then improved in year 3. 
3. It has continually declined over the 3 years. 
4. It has continually improved over the 3 years.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – Year 1 (£44k + £204k / £126k + £34k) = 1.55, Year 2 (£58k + £182k / £152k + £46k) = 1.21, Year 3 (£56k + £162k / £150k + £44k) = 1.12
4. Not correct

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