Task Sheet 16

BALANCE SHEET QUESTIONS

You will find these questions easier if you have completed the Pepper Balance Sheet exercise.
Explain, with an example, the meaning of the following terms:
1. Asset – use the term owned by the firm in your answer

2. Liability – use the word owed in your answer

3. Creditor – use the term owe money to in your answer

4. Debtor – use the term owed money by in your answer

5. Current Assets – use the term cash in your answer

6. List two things other than cash that can be included as current assets

7. Current Liability – use the word debt in your answer

8. Working Capital

9. Current Ratio

10. Acid Test Ratio

11.On Pepper’s balance sheets, which months have an acid test ratio that is dangerously low? Explain
your answer using some numbers. (An acid test ratio should usually be at least 1:1)

12.Why is the acid test ratio a more accurate measure of the health of a firm than the current ratio? Use
the word stock in your answer.

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