Current Assets & Liabilities Flashcards

1
Q

2

What is a current asset?

A

Cash plus other assets that are expected to be sold or converted to cash during the current operating cycle

Includes: Demand deposits, cash equivalents, accounts receivable, inventory, pre-paids, and short-term investments

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2
Q

2

What is a current liability?

A

A liability expected to be paid within 12 months or less

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3
Q

2

How is the Quick Ratio calculated?

A

(Cash + A/R + Trading Securities) / Current Liabilities

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4
Q

2

How is the Current Ratio calculated?

A

Currents Assets / Current Liabilities

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5
Q

2

How is Working Capital calculated?

A

Currents Assets - Current Liabilities

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6
Q

2

How is A/R Turnover calculated?

A

Credit Sales / Average A/R

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7
Q

2

How is Inventory Turnover calculated?

A

COGS / Average Inventory

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8
Q

2

How is Day Sales in Inventory calculated?

A

365 / Inventory Turnover

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9
Q

2

How is Days to Collect A/R calculated?

A

Average A/R / Average Sales per Day

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10
Q

2

How are gain contingencies recorded?

A

They are NOT accrued due to Conservatism

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11
Q

2

When are loss contingencies recorded?

A

If Probable - they are accrued (if estimable) and disclosed

If Reasonably Possible - they are disclosed

If Remote - don’t accrue or disclose

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