Introduction to Accounting Preparing for a User’s Perspective Liquidity Ratios: Quick Ratio, Working Capital, Cash Conversion Cycle Debits and Credits Trainer By Kevin C. Kimball, CPA with support from www.canvas.net Free Jan. 2014 Available on the Google Play Store
Liquidity Ratios: Quick Ratio (Current assets – inventories)/ Current liabilities Quick assets, or acid-test ratio Stricter More Conservative
What is the quick ratio? By Investopedia.com 20X1: 32,000/23,000 = 1.39 20X2: 41,000/17,000 = 2.41
LAC 20X1: 49,000/23,000 = 2.13 versus 20X2: 48,000/17,000 = 2.82 OR versus Source: bizstats.com YouTube Video: Obtain key financial ratios using bizstats.com website
What is the quick ratio? By Investopedia.com 20X1: 32,000/23,000 = 1.39 20X2: 41,000/17,000 = 2.41
Liquidity Ratios: Working Capital (Current assets – Current liabilities)
20X1: 49,000 - 23,000 = 26,000 20X2: 48,000 - 17,000 = 31,000
+ - Liquidity Ratios: Cash conversion cycle Buy->Sit->Sell + - Wait to pay $ Wait to collect $ Days of inventory outstanding Days sales outstanding Days payable outstanding Days of inventory outstanding + Days sales outstanding - Days payables outstanding 4) Cash Conversion Cycle
Liquidity Ratios 1) Current Ratio Current assets / Current liabilities 2) Quick Ratio (Current assets – inventories)/ Current liabilities 3) Working Capital (Current assets – Current liabilities) Days of inventory outstanding + Days sales outstanding - Days payables outstanding 4) Cash Conversion Cycle Liquidity: Ability to pay off current liabilities as the come due within the next year.
Introduction to Accounting Preparing for a User’s Perspective Liquidity Ratios: Quick Ratio, Working Capital, Cash Conversion Cycle Debits and Credits Trainer By Kevin C. Kimball, CPA with support from www.canvas.net Free Jan. 2014 Available on the Google Play Store