F4: Working capital and its components
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Current Assets-Current Liabilities. It's often a measure of solvency of a company and is used in many financial ratios for analysis purposes.
Current Assets/Current Liabilities
(Cash+Net receivables+Marketable securities)/Current Liabilities
Bigger the ratio, less risk of financial distress
Entry to reclass short-term liability to long-term liability
- Short term liabliity DR.
- Long term liability CR.
Cash, money market accounts, but also highly liquid investments with 90 days or les to maturity
Cash that has been set aside for a specific use or purpose (purchase or property, plant, equipment)
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