Liquidity Ratios Flashcards
1
Q
The equation for working capital is
A
Current assets - current liabilities
not a ratio - but $$ value
2
Q
What are considered current assets
A
Current assets include cash, accounts receivable, prepaid expenses, inventories, and available-for-sale securities. (Available-for-sale securities are carried at fair value, not cost.)
3
Q
What are considered current liabilities?
A
A/P, debt (due in current period), deferred revenue,
current period = operating cycle OR 12 months whichever is LONGER
4
Q
Liquidity ratios measure what?
A
the ability of a firm to pay its short-term debts
