data is the current ratio, which is current assets divided by current

Recall the makeup of current assets and current liabilities. Inventory is

to receivables through sales, the receivables are collected in cash, and the

cash is used to buy inventory and pay current liabilities. A company’s

current assets and current liabilities represent the core of its day-to-day

operations. The current ratio measures the company’s ability to pay current

assets with current liabilities. Generally a higher current ratio indicates

a stronger financial position. A higher current ratio suggests that the

business has sufficient liquid assets to maintain normal business

ACID-TEST RATIO The acid-test (or quick) ratio tells us whether the entity

could pay all its current liabilities if they came due immediately. ÷ That

is, could the company pass this acid test? To do so, the company would have

to convert its most liquid assets to cash.

To compute the acid-test ratio, we add cash, short-term investments, and net

current receivables (accounts and notes receivable, net of allowances) and

The days’-sales-in-receivables ratio tells us how many days’ sales remain in

concern of stock holders. Preferred stockholders, who invest primarily to

times during the year. This is generally better than a turnover of 3 or 4.

Some topics in this essay:
INVENTORY TURNOVER, ACID-TEST RATIO, CURRENT RATIO, STOCKHOLDERS’ EQUITY, DEBT RATIOâ€tells, NET SALES, STOCK Earnings, TIMES-INTEREST-EARNED RATIO, TOTAL ASSETS, Accounts Receivable, net income, stockholders’ equity, accounts receivable, current liabilities, rate return, common stock, net sales, current ratio, debt ratio, share common stock, common stockholders’, common stockholders’ equity, income available common, return net sales, assets current liabilities,