Unit 35 - Liquidity KW 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 the 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. Found by dividing current liabilities into current assets
Intangible assets
Non-physical assets, such as brand names, patents and customer lists
Inventories
Stocks, such as raw materials and finished goods held by the business
Liabilities
Money owed by the business to banks and suppliers, for example
Liquidity
The ease with which assets can be converted into cash
Net assets
Total assets - total liabilities
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
Shareholder’s 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 firm’s assets, liabilities and capital
