Fig. 1 is a ratio dashboard prepared for GreenGrid, a business installing solar panels for small firms. The managing director wants to compare performance o...

(a) GreenGrid's current ratio in 2026 is 1.2:1. [1 mark]

(b) \[14\%-8\%=6\text{ percentage points}\] The net profit margin fell by 6 percentage points, not by 6%. [2 marks]

(c) The current ratio fell from 1.8:1 in 2024 to 1.2:1 in 2026. Current assets are becoming closer in value to current liabilities, so GreenGrid has less working-capital protection against late payments or unexpected bills. It may therefore find it harder to pay short-term debts on time. [4 marks]

(d) Higher material or installation costs could reduce the profit left from each sale. Price reductions used to win new contracts could reduce revenue and margin per installation. Alternatively, higher advertising, wage, or office costs could increase operating expenses and reduce net profit margin. Any two developed reasons gain credit. [4 marks]

(e) Opening now could increase sales and spread fixed costs over more work. The current ratio of 1.2:1 remains above 1:1. However, using £120,000 cash would reduce current assets and could push the ratio below 1.2:1. Net profit margin has also fallen to 8%, suggesting weak returns. A justified decision is to delay until profitability improves, or obtain finance rather than use all available cash, because liquidity and profitability are both deteriorating. [5 marks]