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9 marksFinancial Statements Analysis

CAPE Management of Business Unit 1 · 2018 · Paper 2 · Question 3(b)

Joan informs the loan officer that profitability and liquidity ratios are calculated and available, but the loan officer states ratios have limitations in establishing financial health.

Explain THREE limitations of using ratios to assess the financial health of a business.

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Other parts of this question

  1. 3(a)(i)Define the term 'Debt-to-equity ratio'.[2 marks]
  2. 3(a)(ii)Define the term 'Cash budget'.[2 marks]
  3. 3(c)Discuss THREE advantages Basket and Things could experience by preparing a monthly cash budget.[12 marks]

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