Example of current ratio, Accounting Basics

Assignment Help:

Q. Example of current ratio?

The current assets and current liabilities and current ratios of some other companies as of the third quarter of 2001 were

As you are able to see from these comparisons the current ratios vary a great deal. An old rule of thumb is that the current ratio must be at least 2:1. Though what constitutes an adequate current ratio depends on available lines of credit the cash-generating ability of the company and the nature of the industry in which the company operates. For example companies in the airline industry are able to generate huge amounts of cash on a daily basis and may be able to pay their current liabilities even if their current ratio is less than 1:1. Comparing a company's current ratio with other companies in the similar industry makes sense because all of these companies face about the same economic conditions.

666_Example of current ratio.png

A company with the least current ratio in its industry perhaps unable to pay its short-term obligations on a timely basis unless it can borrow funds from a bank on a line of credit. A company with the uppermost current ratio in its industry may have on hand too many current assets such as cash and marketable securities which could be invested in more productive assets. The next section describes the concepts, assumptions and principles that constitute the accounting theory underlying financial accounting. Therefore accounting theory dictates the standards and procedures applied to the reporting of financial information in the financial statements.


Related Discussions:- Example of current ratio

Verifiability of financial information, Q. Verifiability of Financial infor...

Q. Verifiability of Financial information? Verifiability Financial information has verifiability when independent measurers are able to substantially duplicate it by using the

Explain about sales account, Q. Explain about Sales account? In theory ...

Q. Explain about Sales account? In theory sellers could record both sales allowances and sales returns as debits to the Sales account for the reason that they cancel part of th

Accrual concept, Accrual Concept The accrual concept makes a distincti...

Accrual Concept The accrual concept makes a distinction among the receipt of cash, and the right to obtain it, and the payment of cash and the legal obligation for pay it. In

Fundamental, i have propblem in to make assignment so get me help please

i have propblem in to make assignment so get me help please

Chnages, What is the latest change taking place in the accounting world tha...

What is the latest change taking place in the accounting world that will make a big difference to the way accountants prepare accounts?

Birch issued 200 shares of $12 par common stock, Birch issued 200 shares of...

Birch issued 200 shares of $12 par common stock in exchange for a piece of equipment with a current market value of $3,000.Whichof the following is not part of the journal entry

Accounting concepts and conventions, what is the implication of applying ac...

what is the implication of applying accounting concepts wrongly

Internal audit, Accounting is a significant service activity in business an...

Accounting is a significant service activity in business and is concerned along with collecting, evaluating, communicating and recording the results of past events. The history of

Parternship, formation of partnership and changes in constitution of parter...

formation of partnership and changes in constitution of parternship

Determine about the sales returns and allowances, Determine about the Sales...

Determine about the Sales returns and allowances Allowance results when a buyer decides to keep defective or damaged goods though at a reduction from the original price.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd