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Flashcards in Current Assets & Liabilities Deck (11):
1

What is a current asset?

Cash plus other assets that are expected to be sold or converted to cash during the current operating cycle

Includes: Demand deposits, cash equivalents, accounts receivable, inventory, pre-paids, and short-term investments

2

What is a current liability?

A liability expected to be paid within 12 months or less

3

How is the Quick Ratio calculated?

(Cash + A/R + Trading Securities) / Current Liabilities

4

How is the Current Ratio calculated?

Currents Assets / Current Liabilities

5

How is Working Capital calculated?

Currents Assets - Current Liabilities

6

How is A/R Turnover calculated?

Credit Sales / Average A/R

7

How is Inventory Turnover calculated?

COGS / Average Inventory

8

How is Day Sales in Inventory calculated?

365 / Inventory Turnover

9

How is Days to Collect A/R calculated?

Average A/R / Average Sales per Day

10

How are gain contingencies recorded?

They are NOT accrued due to Conservatism

11

When are loss contingencies recorded?

If Probable, they are accrued (if estimable) and disclosed

If Reasonably Possible, they are disclosed

If Remote, don't accrue or disclose