Current Assets & Liabilities

Question 1

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Q

Answer 1

A

Question 2

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What is a current asset?

Answer 2

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

Question 3

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What is a current liability?

Answer 3

A liability expected to be paid within 12 months or less

Question 4

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How is the Quick Ratio calculated?

Answer 4

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

Question 5

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How is the Current Ratio calculated?

Answer 5

Currents Assets / Current Liabilities

Question 6

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How is Working Capital calculated?

Answer 6

Currents Assets - Current Liabilities

Question 7

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How is A/R Turnover calculated?

Answer 7

Credit Sales / Average A/R

Question 8

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How is Inventory Turnover calculated?

Answer 8

COGS / Average Inventory

Question 9

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How is Day Sales in Inventory calculated?

Answer 9

365 / Inventory Turnover

Question 10

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How is Days to Collect A/R calculated?

Answer 10

Average A/R / Average Sales per Day

Question 11

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How are gain contingencies recorded?

Answer 11

They are NOT accrued due to Conservatism

Question 12

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When are loss contingencies recorded?

Answer 12

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

If Reasonably Possible - they are disclosed

If Remote - don’t accrue or disclose