Basic Concepts of Financial Statements

Question 1

What is included in general and admin expenses?

Answer 1

-Officers’ salaries
-Accounting and legal exp
- Insurance

Question 2

What is the equation for the current ratio?

Answer 2

Current assets / current liabilities

Question 3

What is the equation for the quick ratio?

Answer 3

Cash + marketable securities + AR / current liabilities

Question 4

What is the cash ratio?

Answer 4

Cash + marketable securities / current liabilities

Question 5

How do you reconcile net cash from book to bank?

Answer 5

Cash balance per books
+interest paid by bank
+deposits not yet recorded in books
-bank charges
-returned checks
-withdrawals not yet recorded
+/- recording errors

Question 6

How do you reconcile net cash from the bank to book?

Answer 6

Bank statement balance
+deposits in transit
-checks outstanding
+/- bank errors

Question 7

How do you calculate inventory turnover?

Answer 7

COGS/ (beg inv. + end inv. / 2)

Question 8

How do you calculate AR turnover?

Answer 8

365/ (net credit sales/avg AR)