Current Assets & Liabilities

Question 1

FAR

Q

Answer 1

A

Question 2

FAR

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

FAR

What is a current liability?

Answer 3

A liability expected to be paid within 12 months or less

Question 4

FAR

How is the Quick Ratio calculated?

Answer 4

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

Question 5

FAR

How is the Current Ratio calculated?

Answer 5

Currents Assets / Current Liabilities

Question 6

FAR

How is Working Capital calculated?

Answer 6

Currents Assets - Current Liabilities

Question 7

FAR

How is A/R Turnover calculated?

Answer 7

Credit Sales / Average A/R

Question 8

FAR

How is Inventory Turnover calculated?

Answer 8

COGS / Average Inventory

Question 9

FAR

How is Day Sales in Inventory calculated?

Answer 9

365 / Inventory Turnover

Question 10

FAR

How is Days to Collect A/R calculated?

Answer 10

Average A/R / Average Sales per Day

Question 11

FAR

How are gain contingencies recorded?

Answer 11

They are NOT accrued due to Conservatism

Question 12

FAR

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