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FAR - I. CONCEPTUAL FRAMEWORK AND FINANCIAL REPORTING > B. GENERAL PURPOSE FINANCIAL STATEMENTS - 1b. BALANCE SHEET/STATEMENT OF FINANCIAL POSITION > Flashcards

B. GENERAL PURPOSE FINANCIAL STATEMENTS - 1b. BALANCE SHEET/STATEMENT OF FINANCIAL POSITION Flashcards

1
Q

B. GENERAL PURPOSE FINANCIAL STATEMENTS - 1. BALANCE SHEET/STATEMENT OF FINANCIAL POSITION

Common ratios used to analyze a balance sheet: (3)

A

Current ratio:

Quick ratio:

Debt to equity ratio:

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2
Q

B. GENERAL PURPOSE FINANCIAL STATEMENTS - 1. BALANCE SHEET/STATEMENT OF FINANCIAL POSITION

Current ratio: Describe

A

Current ratio: This is used to evaluate current assets compared to current liabilities, or:

Does the company have enough short-term resources to cover their short-term liabilities?

You want to see a ratio of at least 1 to show that the company has more current assets than current liabilities.

πΆπ‘’π‘Ÿπ‘Ÿπ‘’π‘›π‘‘ π‘…π‘Žπ‘‘π‘–π‘œ = πΆπ‘’π‘Ÿπ‘Ÿπ‘’π‘›π‘‘ 𝐴𝑠𝑠𝑒𝑑𝑠 / πΆπ‘’π‘Ÿπ‘Ÿπ‘’π‘›π‘‘ πΏπ‘–π‘Žπ‘π‘–π‘™π‘–π‘‘π‘–π‘’π‘ 

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3
Q

B. GENERAL PURPOSE FINANCIAL STATEMENTS - 1. BALANCE SHEET/STATEMENT OF FINANCIAL POSITION

Quick ratio:

A

Quick ratio: This is a more telling version of the current ratio, with inventory and prepaids taken out of the equation.

π‘„π‘’π‘–π‘π‘˜ π‘…π‘Žπ‘‘π‘–π‘œ = (πΆπ‘’π‘Ÿπ‘Ÿπ‘’π‘›π‘‘ π΄π‘ π‘ π‘’π‘‘π‘ βˆ’πΌπ‘›π‘£π‘’π‘›π‘‘π‘œπ‘Ÿπ‘¦ βˆ’ π‘ƒπ‘Ÿπ‘’π‘π‘Žπ‘–π‘‘π‘ ) / πΆπ‘’π‘Ÿπ‘Ÿπ‘’π‘›π‘‘ πΏπ‘–π‘Žπ‘π‘–π‘™π‘–π‘‘π‘–π‘’π‘ 

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4
Q

B. GENERAL PURPOSE FINANCIAL STATEMENTS - 1. BALANCE SHEET/STATEMENT OF FINANCIAL POSITION

Debt to equity ratio:

A

Debt to equity ratio: The ratio of what is owed to what is owned.

𝐷𝑒𝑏𝑑 π‘‘π‘œ πΈπ‘žπ‘’π‘–π‘‘π‘¦ = π‘‡π‘œπ‘‘π‘Žπ‘™ πΏπ‘–π‘Žπ‘π‘–π‘™π‘–π‘‘π‘–π‘’π‘  / π‘†β„Žπ‘Žπ‘Ÿπ‘’β„Žπ‘œπ‘™π‘‘π‘’π‘Ÿπ‘ β€™πΈπ‘žπ‘’π‘–π‘‘π‘¦

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FAR - I. CONCEPTUAL FRAMEWORK AND FINANCIAL REPORTING (15 decks)

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