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19 Cards in this Set
- Front
- Back
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Current ratio formula?
What does a low ratio indicate? What does a high ration indicate? |
CA/CL
solvency problem not investing properly |
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A/R turnover formula?
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net credit sales/average A/R
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Inventory turnover formula?
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cost of sales/average inventory
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What do a low A/R turnover and low inventory turnover ratio indicate?
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a need for a higher current ratio
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What ratio does LIFO lower?
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current ratio
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Quick (acid test) formula?
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cash+marketable securities+net receivables/current liabilities
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What current assets doe the quick (acid test) ratio ignore?
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inventories and prepaids
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Cash ratio formula?
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cash+marketable securities/current liabilities
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This ratio reflects the significance of cash flow for settling obligations as they become due?
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cash flow ratio
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Cash flow ratio formula?
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cash flow from operations/current liabilities
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This is the most conservative of the working capital ratios?
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net working capital ratio
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Net working capital ratio?
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CA-CL/Total Assets
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Journal entry to record declaration of a dividend?
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Dr Retained Earnings
Cr Dividends Payable (current liability) |
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Name 4 areas that ought to be covered in a code of conduct?
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I-CUB
- Illegal payments - Conflicts of interest - Use of inside information - Business gifts |
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Name 4 aspects of the statement of cash flow using the direct method?
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- acceptable in preparing a statement of cash flow
- FASB encourages use of direct method - reports major classes of cash receipts and disbursements - discloses more info than indirect method |
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What is the principal advantage of reporting via the direct methodd on the statement of cash flow?
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reports the major classes of cash receipts and disbursements and discloses more info than indirect method
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Explain how the indirect method for the statement of cash flow is derived?
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net income on the accrual basis is adjusted to the cash basis by adding or subtracting noncash items included in net income
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What useful link does the indirect method from the statement of cash flow provide?
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a useful link between the statement of cash flows, balance sheet, and income statement
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What does a high A/R turnover ratio mean?
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customers are paying promptly
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