ACC501 Business Finance GDB 14 April Spring 2011 solution

[Xpert]

"Discussion Question"

Suppose you are supplier of material to a manufacturing concern ABC. Company ABC wants to purchase material from you on credit basis and promises to pay within three months. Existing Current Ratio and Quick Ratios for Company ABC are as follows:
Current Ratio = Rs. 6,351 = 1.65:1
Rs. 3,850


Quick Ratio = Rs. 5,325 = 1.38:1
Rs. 3,850
Required:
You are required to answer the following:

1. Being a supplier, which Balance Sheet Ratios of Company ABC will be more important for you. (Only mention the names of ratios, details are not required)
   
2. Which balance sheet items of Company ABC will be affected if you’ve supplied material of Rs. 985 on account? (Details are not required)
   
3. By keeping in view the given Current Ratio, what will be new Current Ratio of ABC Company if you’ve supplied material of Rs. 985 on account? (Working is not required. Only provide resulting figure)