Day: October 9, 2025

Accounting Multiple Choice Question – 9 October 2025

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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Alex plc’s current ratio this year is 1.5:1 compared to 1.25:1 last year.

Which ONE of the following might help to explain this increase in the ratio?

Select ONE answer:

  1. Alex plc paid its payables earlier than usual out of a bank overdraft
  2. Alex plc made an unusually large sale immediately after the year-end
  3. Alex plc made an unusually large purchase of goods for cash immediately before the year-end, and these goods remain in inventory
  4. Alex plc paid its payables earlier than usual out of a positive cash balance

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 4

  1. Not correct
  2. Not correct
  3. Not correct
  4. Correct => If payables are paid out of a positive cash balance, then this will reduce both cash (assets) and payables by the same absolute amount. However, since the current ratio is positive (assets are greater than liabilities), the ratio will increase.

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