It measures the ability of a company to pay off short-term liabilities with cash or cash counterpartsĬash Ratio = Cash and Cash Counterparts/ Current Liabilities If the inventory were to be sold immediately, it would be sold at a huge discount which is not profitable to the carrying cost on the balance sheet.Acid-test ratio is used because of simple logic: inventory is slow to move and cannot be converted into cash quickly inventory may take time to sell.It measures the ability of a company to use its quick assets (like cash) to pay off short- and long-term liabilities.Īcid Test Ratio - (Current Assets - Inventory)/ Current Liabilities Current ratio shows how it can maximize liquidity of its current assets to settle debts and payables.The current ratio reveals the financial health of a company.It measures the company’s ability to pay off its short-term liabilities with its current assets.Ĭurrent Ratio = Current Assets/ Current Liabilities Liquidity Ratios are financial ratios that measure the ability of a company to pay back its short- and long-term obligations. To know more about Financial Statements, check this out.Ĭommonly Used Liquidity Ratios and Formulas For all three other Amazon financial statement examples, click here. *Below is a photo example of Amazon’s balance sheet. Accounts receivable and net credit sales found on the balance sheet (or general ledger).Gross Profit found on the income statement.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |