Question 10 A business has a current ratio of 2:1 and an asset test ratio of 1,5:1. The business has a risk seeking attitude towards risk and is considering a risk retention programme. With due...

Question 10

A business has a current ratio of 2:1 and an asset test ratio of 1,5:1. The business has a risk seeking attitude towards risk and is considering a risk retention programme. With due consideration of these ratios and the intention of the business, indicate the correct statement below:

1  A higher level of loss assumption based on working capital guidelines is possible.

2  The business is not in a good position to handle current liabilities.

3  The current ratio is indicative of an illiquid working capital position.

4  The ratios of the business are not favourable for a risk retention programme.