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Subjects · Leaving Cert Accounting

Leaving Cert Accounting: Ratios — liquidity

How often Ratios — liquidity comes up on the Accounting papers, every year it was asked, and questions to try.

HL Asked on 2 of the last 10 Higher Level papers, most recently in 2023.

OL Asked on 10 of the last 10 Ordinary Level papers, most recently in 2026. banker

Ratios — liquidity, Higher Level(6 marks)

Quick ones on Ratios — liquidity.

(a)The current ratio is…
  1. Current liabilities ÷ current assets
  2. Current assets ÷ current liabilities
  3. (Current assets − stock) ÷ current liabilities
(b)The acid test ratio is…
  1. (Current assets − current liabilities) ÷ closing stock
  2. (Current assets − debtors) ÷ current liabilities
  3. (Current assets − closing stock) ÷ current liabilities
(c)The generally accepted ideal acid test ratio is…
  1. 1 : 1
  2. 3 : 1
  3. 2 : 1
Show the answers

(a) Current assets ÷ current liabilities

(b) (Current assets − closing stock) ÷ current liabilities

(c) 1 : 1

Your turn: Higher Level questions on Ratios — liquidity.

Higher Level

Asked on 2 of the last 10 Higher Level papers, most recently in 2023.

Every paper, year by year

YearWhere it came up
2026Not asked
2025Not asked
2024Not asked
2023Q5
2022Not asked
2021Not asked
2019Q5
2018Not asked
2017Not asked
2016Not asked

Links open the State Examinations Commission’s paper for that year.

More Ratios — liquidity questions

Ratios — liquidity, 2 marks

An acid test ratio well below 1 : 1 suggests…

  1. Too much cash lying idle in the bank
  2. Strong profitability over the year
  3. Possible difficulty paying short-term debts
Show the answer

Possible difficulty paying short-term debts

Without selling stock, the firm has less than €1 of liquid assets for each €1 of short-term debt.

Ratios — liquidity, 2 marks

A very high current ratio, such as 5 : 1, may mean…

  1. Very high gearing and heavy borrowing
  2. Resources are lying idle in stock, debtors or cash
  3. Serious liquidity problems in paying creditors
Show the answer

Resources are lying idle in stock, debtors or cash

Too much money is tied up in stock, debtors or cash that could be earning a return elsewhere.

Ordinary Level

Asked on 10 of the last 10 Ordinary Level papers, most recently in 2026. banker

Every paper, year by year

YearWhere it came up
2026Q5
2025Q5
2024Q5
2023Q5
2022Q5
2021Q5
2019Q5
2018Q5
2017Q5
2016Q5

Links open the State Examinations Commission’s paper for that year.

More Ratios — liquidity questions

Ratios — liquidity, 3 marks

Current assets €75,000 (stock €30,000); current liabilities €50,000. Acid test ratio?

  1. 1.5 : 1
  2. 0.6 : 1
  3. 0.9 : 1
Show the answer

0.9 : 1

Acid test = (current assets − closing stock) : current liabilities = €45,000 : €50,000 = 0.9 : 1.

Ratios — liquidity, 2 marks

Another name for the current ratio is the…

  1. Stock turnover
  2. Working capital ratio
  3. Quick ratio
Show the answer

Working capital ratio

Current ratio = working capital ratio: current assets : current liabilities.

Ratios — liquidity, 2 marks

The acid test ratio fell from 1.1 : 1 to 0.6 : 1. The firm's liquidity has…

  1. Got worse
  2. Improved
  3. Stayed the same
Show the answer

Got worse

Fewer liquid assets for each €1 owed means the firm is less able to pay its short-term debts.

Other Accounting topics

All of Leaving Cert Accounting