Current Assets & Liabilities

Question 1

<p>What is a current asset?</p>

Answer 1

<p>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, prepaids, and short-term investments</p>

Question 3

<p class=”large” style=”text-align:center”;>What is a current liability?</p>

Answer 3

<p class=”large” style=”text-align:center”;>A liability expected to be paid within 12 months or less</p>

Question 3

<p>How is the Quick Ratio calculated?</p>

Answer 3

<p>(Cash + A/R + Trading Securities) / Current Liabilities</p>

Question 4

<p>How is the Current Ratio calculated?</p>

Answer 4

<p>Currents Assets / Current Liabilities</p>

Question 6

<p class=”large” style=”text-align:center”;>How is Working Capital calculated?</p>

Answer 6

<p class=”large” style=”text-align:center”;>Currents Assets - Current Liabilities</p>

Question 6

<p>How is A/R Turnover calculated?</p>

Answer 6

<p>Credit Sales / Average A/R</p>

Question 7

<p>How is Inventory Turnover calculated?</p>

Answer 7

<p>COGS / Average Inventory</p>

Question 8

<p>How is Day Sales in Inventory calculated?</p>

Answer 8

<p>365 / Inventory Turnover</p>

Question 10

<p class=”large” style=”text-align:center”;>How is Days to Collect A/R calculated?</p>

Answer 10

<p class=”large” style=”text-align:center”;>Average A/R / Average Sales per Day</p>

Question 10

<p>How are gain contingencies recorded?</p>

Answer 10

<p>They are NOT accrued due to Conservatism</p>

Question 11

<p>When are loss contingencies recorded?</p>

Answer 11

<p>If Probable - they are accrued (if estimable) and disclosed

If Reasonably Possible - they are disclosed

If Remote - don't accrue or disclose</p>