Liquidity ratios indicate the ease that a company has to turn assets into cash. A business must be able to perform positively in relation to profitability but must also be able to pay creditors, expenses and loans as they fall due. The Current and Acid Test Ratios are the best known measures of this financial strength.

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Under a hire purchase contract, ownership of the machine does not pass to the farmer or contractor until the final instalment is paid. However, the tax treatment is similar to that of an outright purchase. Capital allowances are usually available at a rate of 12.5pc per year on the machine over an eight-year period. If

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