Liquidity/Solvency Flashcards
1
Q
What is Liquidity/Solvency?
A
it is the abililty of a business to pay its short term debts.
2
Q
Current Ratio?
A
=Current Assets /Current Liabilities
3
Q
What are current assets?
A
inventory, trade receivables, bank account (unless overdrawn) and cash
4
Q
What are current liabilities?
A
trade payables, bank overdraft and loans repayable within one year.
5
Q
Inventory
A
means unsold stocks of materials and/or finished goods
