FAR-26 RATIOS Flashcards Preview

CPA FAR > FAR-26 RATIOS > Flashcards

Flashcards in FAR-26 RATIOS Deck (8)
Loading flashcards...
1
Q

Six Ratios Regularly Tested

A

Current Ratio Quick (acid test) ratio

Inventory turnover ratio

Number of day’s sales in average inventory

Receivables turnover ratio

Number of day’s sales in average receivables

2
Q

Working Capital

A

-measures company’s solvency

Working Capital = Current assets - Current liabilities

3
Q

Current Ratio

A

-measures short term debt paying abilities

Current Ration = Current Assets / Current Liabilities

4
Q

Quick Acid Test Ratio

A

-measures immediate short-term liquidity

Formula = Cash, MKT securities, & A/R / current liabilities

OR

Quick ratio = Current assets (excluding Inventories and Prepaid assets) ÷ Current liabilities

5
Q

Receivables turnover

A

-measures liquidity of receivables

Receivables Turnover = Credit sales / Avg receivables (net)

Avg Receivables = Beginning + Ending/2

6
Q

Inventory turnover

A

-measures liquidity of inventory

Formula = COGS / Avg Inventory

COGS = Beg inv + Purchases - End Inv

Avg Inv = Beg + Ending / 2

7
Q

Number of Day’s supply in average inventory

A

-measures number of days required to sell inventory Formula = avg inventory / Inventory Turnover or Formula = avg inventory / avg daily cogs***

or

= Inventory Turnover / 365

8
Q

Number of Day’s sales in average receivables

A

-measures number of days required to collect receivables Formula = avg receivable / receivables turnover or Formula = avg receivables / daily credit sales*** Daily credit sales = credit sales / working days per yr

or

= Receivables Turnover / 365