What this practice covers
These questions are drawn from past CIE 9706 Accounting papers and filtered to liquidity ratios. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
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What examiners see students get wrong here
These are the errors that cost marks on liquidity ratios, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Including inventory in the liquid ratio.
- Treating 2 : 1 as a rule that applies to every business.
- Saying a high current ratio is always good.
- Confusing liquidity with profitability, and using profit figures to explain a liquidity ratio.
- Quoting the ratio without saying what it means for paying debts.
- Suggesting improvements without noting the cost of each.
- Writing the ratio as a percentage. It is a ratio to one.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Liquidity ratios revision notes.