Liquidity Key Terms Flashcards
Acid Test Ratio
Similar to the current ratio but excludes stocks from current assets. A more severe test of liquidity.
Assets
Resources that belong to a business.
Capital
Money put into the business by the owners.
Current Assets
Liquid assets, i.e. those assets that will be converted into cash within one year.
Current Liabilities
Money owed by the business that must be repaid within one year.
Current Ratio
Assesses whether or not a business has enough resources to meet any debts that arise in the next 12 months.
Intangible Assets
Non-physical assets, such as brand names, patents and customer lists.
Inventories
Stocks, such as raw materials and finished goods held by a business.
Liabilities
Money owed by the business to banks and suppliers for example.
Liquidity
The ease with which assets can be converted into cash.
Non-current Assets
Long-term resources that will be used by the business repeatedly over a period of time.
Non-current Liabilities
Money owed by the business for more than one year, sometimes called long-term liabilities.
Shareholders Equity
The amount of money owed by the business to the shareholders.
Statement of Financial Position (Balance Sheet)
A summary at a particular point in time of the value of a firms assets, liabilities and capital.
Trade and Other Payables
Money owed by the business to suppliers and utilities , for example, sometimes called trade creditors.
