Economics · Financial Statement Analysis
A business has compiled the following working capital ratios for two consecutive financial years: Ratio20X920X8Current ratio1.2:11.5:1Receivables collection period75 days50 daysPayables payment period30 days45 daysInventory turnover period42 days35 days Which of the following statements is correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The business is taking longer to pay its suppliers in 20X9.
- 2The business is suffering from a worsening liquidity position in 20X9.✓
- 3The business is receiving cash from customers more quickly in 20X9 than in 20X8.
- 4The liquidity and working capital management has improved in 20X9.
Correct answer
The business is suffering from a worsening liquidity position in 20X9.
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