【正确答案】Cash balances at the end of each month:

【正确答案】Calculation of current ratio Inventory at the end of the three-month period: This will be the finished goods for April sales of 1,500 units, which can be assumed to be valued at the cost of production of $400 per unit for materials and $100 per unit for variable overheads and wages. The value of the inventory is therefore 1,500 x 500 = $750,000. Trade receivables at the end of the three-month period: These will be March sales of 1,400 x 800 x 1·05 = $1,176,000. Cash balance at the end of the three-month period: This was forecast to be $992,000. Trade payables at the end of the three-month period: This will be the cash owed for March raw materials of $600,000. Forecast current ratio Assuming that current liabilities consists of trade payables alone: Current ratio = (750,000 + 1,176,000 + 992,000)/600,000 = 4·9 times

【正确答案】If Flit Co generates a short-term cash surplus, the cash may be needed again in the near future. In order to increase profitability, the short-term cash surplus could be invested, for example, in a bank deposit, however, the investment selected would normally not be expected to carry any risk of capital loss. Shares traded on a large stock market carry a significant risk of capital loss, and hence are rarely suitable for investing short-term cash surpluses.