Question

Malcolm manages his cash flow very carefully.  His surpluses have grown over the years, and being conservative he invests them in GICs.  Given this behaviour, which of his ratios should improve?

1. Savings ratio
2. Debt-to-assets ratio
3. Liquidity ratio
4. Current ratio

1. I, II and III
2. II, III and IV
3. I and IV
4. I, II, III and IV

Answer 1

Answer : d. I, II, III and IV

Explanation : As he follows a conservative approach and saves his money in GICs, his saving ratio should have improved and due to the habit of saving he do not own much of debt and hence his Debt-to-assets ratio should have improved. As he has invested in GICs which are liquid in nature and are considered as current assets as well his Liquidity and current ratio should have improved

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