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20 Cards in this Set
- Front
- Back
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Current Liabilities
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Incurred to meet cash needs during the operating cycle
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Working Capital
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current assets-current liabilities
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Payables Turnover
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Number of times, on average, that a company pays its accounts payables in an accounting period
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Payables Turnover Formula
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=(Cost of goods sold +/-change in inventory)/average accounts payable
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Which financial statement do you find costs of goods sold?
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income statement
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Days’ Payable
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How long, on average, a company takes to pay its accounts payables
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Days’ Payable Formula
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=365/Payables Turnover
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Current Liabilities
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*Expected to be satisfied within one year or within the normal operating cycle, whichever is longer
*Paid out of current assets or with cash generated from operations |
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Long-term liabilities
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Due beyond one year or beyond the normal operating cycle
Used to finance long-term assets |
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Definitely determinable liabilities
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Set by contract or by statute and can be measured exactly
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Estimated liabilities
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Definite debts or obligations of which the exact dollar amount cannot be known until a later date
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Examples of Definitely Determinable Liabilities
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*Accounts payable
*Bank loans and commercial paper *Notes payable *Accrued liabilities *Dividends payable *Sales and excise taxes payable *Current portion of long-term debt *Payroll liabilities *Unearned revenues |
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Accounts Payable
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Short-term obligations to suppliers for goods and services
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Bank Loans or Line of Credit
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Allows a company to borrow funds when needed to finance current operations
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Commercial Paper
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A way to borrow money by using unsecured short-term loans sold directly to the public
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Notes Payable
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Short-term obligations represented by promissory notes
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Accrued Liabilities
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Existing liabilities that have not yet been recorded
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Dividends Payable
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Dividends that have been declared but not yet paid; Cash dividends are a distribution of earnings by a corporation
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Sales and Excise Taxes Payable
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Taxes collected by businesses that must be forwarded to the appropriate government agencies
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Current Portion of Long-Term Debt
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Includes the portion of long-term debt that is due within the next year and is to be paid from current assets
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