Current Assets & Liabilities Flashcards
Current Assets and Liabilities
What is a current asset?
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
Current Assets and Liabilities
What is a current liability?
A liability expected to be paid within 12 months or less
Current Assets and Liabilities
How is the Quick Ratio calculated?
(Cash + A/R + Trading Securities) / Current Liabilities
Current Assets and Liabilities
How is the Current Ratio calculated?
Currents Assets / Current Liabilities
Current Assets and Liabilities
How is Working Capital calculated?
Currents Assets - Current Liabilities
Current Assets and Liabilities
How is A/R Turnover calculated?
Credit Sales / Average A/R
Current Assets and Liabilities
How is Inventory Turnover calculated?
COGS / Average Inventory
Current Assets and Liabilities
How is Day Sales in Inventory calculated?
365 / Inventory Turnover
Current Assets and Liabilities
How is Days to Collect A/R calculated?
Average A/R / Average Sales per Day
Current Assets and Liabilities
How are gain contingencies recorded?
They are NOT accrued due to Conservatism
Current Assets and Liabilities
When are loss contingencies recorded?
If Probable - they are accrued (if estimable) and disclosed
If Reasonably Possible - they are disclosed
If Remote - don’t accrue or disclose
