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Liquidity Ratios
Chapters 5 & 6
10
Accounting
Undergraduate 3
10/29/2012

Additional Accounting Flashcards

 


 

Cards

Term
Working Capital
Definition
= Current Assets - Current Liabilities
-cash,A/R,inventory, -A/P,N/P,S/P, unearned revenue
prepaid expenses
Term
Current Ratio
Definition
=Current Assets/Current Liabilities

ideal 2:1
Term
Quick Ratio
Definition
=(Current Assets-Inventory-Prepaid)/Current Liabilities

ideal 1:1
Term
Inventory Turnover
Definition
how many times you buy and sell
-better to have MORE turnover

=Cost of Goods Sold/Average Inventory = x times
Term
Average Age of Inventory
Definition
=365/Inventory Turnover = x days

-want low --> don't keep on shelf
Term
Accounts Receivable Turnover
Definition
=Net Sales(Sales-Sales R&A-Discounts)/Average A/R
Term
Average Collect Period
Definition
=365/Accounts Receivable Turnover = x days
Term
Operating Cycle
Definition
=Average Age of Inventory + Average Collect Period
= total # days
Term
Gross Profit Margin
Definition
=Gross Profit(Net sales-COGS)/Net Sales
Term
Net Profit Margin
Definition
=Net Profit/Net Sales
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