Chapter 4

Question 1

classified balance sheet

Answer 1

places each asset and each liability into a specific category

• assets are shown in order of liquidity
• liabilities are classified as current(due within one year)or long term(due after one year)

Question 2

liquidity

Answer 2

measures how quickly and easily an account can be converted to cash

Question 3

operating cycle

Answer 3

is the time span during which cash is paid for goods and services, which are then sold to customers, from whom the business collect cash