Acid-Test Ratio Decrease

Steps:

• Recall acid-test ratio formula: (current assets excluding inventory) / current liabilities.
• Note ratio decreased from 1 January to 31 December 2022.
• Identify changes affecting numerator (cash, receivables) or denominator (liabilities).
• Evaluate options: only decreasing receivables reduces numerator, lowering ratio.

Why D is correct:

• Trade receivables are in the numerator; decreasing them reduces the ratio per the formula.

Why the others are wrong:

• A: Bank overdraft decrease reduces denominator, increasing ratio.
• B: Inventory excluded from numerator, so no effect.
• C: Other payables decrease reduces denominator, increasing ratio.

Final answer: D