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What is the definition of working capital?
Current assets - Current Liabilitites
measure of solvency
What is current ration and quick ratio?
Current Ratio: C.A./C.L.
Quick Ratio: (cash+cash equiv.+mrktbl securities)/C.L.
What are current assets?
resources that are reasonable expected to be realized in cash, sold/consumed during normal operating cycle of a busines or one year (whichever is longer)
ex: cash, trading securities, N/R, other short term investments; prepaid expense,
*cash surrender value: life insurance can be C.A. or non C.A
What are Current Liabilities?
- "Is it due within the next year?"
- sources: may arise from regular business operations (A/P;W/P) or to meet cahs needs through bank borrowings
Can short term obligation that are
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