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The current ratio states that the business has over ?3 of current assets for every ?1 of current liabilities.
The acid test ratio covers the problem with the stock in the current ratio as there may be out of date or obsolete items but also it is a possible source of cash to pay of debts. The acid test ratio states that C & V Fashions will be able to pay their creditors and pay of their current liabilities easily as the ratio is over 1:1. Even with the least liquid current asset, the business will have spare capital to use therefore the performance of the business is very good shown through these ratios...
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