Ratios used in Analytical Procedures Flashcards
1
Q
Current Ratio
A
Current Assets/ Current Liabilities
Tells us how solvent the company is
4:1 good
1:4 not good
2
Q
Quick Ratio
A
Out of Current Assets- which are quickly converted to cash?
Cash+Marketable Securities+Net Accounts Receivable /Current Liabilities
3
Q
AR Turnover Ratio
A
Net Credit Sales/Avg AR
Ex: 6 “Receivables turnover 6 times a year or every 2 months, not worth it” Ain’t collectible
4
Q
Inventory Turnover
A
COGS/Avg Inventory
Ex: 6 “Inventory turns over 6 times a year or every two months” Ain’t sellable
