Current Assets & Liabilities Flashcards

1
Q

Q

A

A

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2
Q

What is a current asset?

A

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

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3
Q

What is a current liability?

A

A liability expected to be paid within 12 months or less

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4
Q

How is the Quick Ratio calculated?

A

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

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5
Q

How is the Current Ratio calculated?

A

Currents Assets / Current Liabilities

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6
Q

How is Working Capital calculated?

A

Currents Assets - Current Liabilities

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7
Q

How is A/R Turnover calculated?

A

Credit Sales / Average A/R

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8
Q

How is Inventory Turnover calculated?

A

COGS / Average Inventory

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9
Q

How is Day Sales in Inventory calculated?

A

365 / Inventory Turnover

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10
Q

How is Days to Collect A/R calculated?

A

Average A/R / Average Sales per Day

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11
Q

How are gain contingencies recorded?

A

They are NOT accrued due to Conservatism

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12
Q

When are loss contingencies recorded?

A

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

If Reasonably Possible - they are disclosed

If Remote - don’t accrue or disclose

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13
Q

Cash & cash equivalents

A
Maturity < 3 mo 
Yes:
   - money mkt acct
   - t-bill
   - CD
   - petty cash 

No:

  • neg bal in checking acct (liab)
  • cash in bond sinking fund
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14
Q

Current receivables acquired:

  • customary trade terms
  • NOT customary trade terms
A
  • rptd @ face
    • rptd @ PV
      (Principal + (principalinttime) * PV factor)
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