Slide 10-6 Evaluating Liquidity An important indicator of a company ability to meet its current obligations Two commonly used measures Working Capital Current Assets- Current Liabilities Current Ratio Current Assets Current Liabilities Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc, 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 10-6 Irwin/McGraw-Hill Evaluating Liquidity Current Ratio = Current Assets ?Current Liabilities Working Capital = Current Assets - Current Liabilities An important indicator of a company抯 ability to meet its current obligations. Two commonly used measures:
Slide 10-7 Liabilities Question Devon Mfg. has current liabilities of $230,000 and current assets of 322,000 What is Deyon's current ratio? Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 10-7 Irwin/McGraw-Hill Liabilities Question Devon Mfg. has current liabilities of $230,000 and current assets of $322,000. What is Devon’s current ratio?
Slide 10-8 Liabilities Question Devon Mfg. has current liabilities of $230,000 and current assets of 322,000 What is Deyon's current ratio? Current Current Current Ratio Assets Liabilities =$322000?$230,000 Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 10-8 Irwin/McGraw-Hill Liabilities Question Current Ratio = Current Assets ? Current Liabilities = $ 322,000 ? $ 230,000 = 1.4 Devon Mfg. has current liabilities of $230,000 and current assets of $322,000. What is Devon’s current ratio?
Slide 10-9 Accounts Payable Short-term obligations to suppliers for purchases of merchandise and to others for goods and services Office Merchandise supplies Inventory Invoices Invoices Utility and Shipping phone bills charges Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 10-9 Irwin/McGraw-Hill Accounts Payable Short-term obligations to suppliers for purchases of merchandise and to others for goods and services. Merchandise Inventory invoices Shipping charges Utility and phone bills Office supplies invoices
Slide 10-10 Notes payable When a company borrows money, a note payable is created Current Portion of Notes Payable The portion of a note payable that is due within one year, or one operating cycle, whichever is longer. Current Notes Payable Total Notes Payable Noncurrent Notes Payable Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 10-10 Irwin/McGraw-Hill Notes Payable Current Notes Payable Noncurrent Notes Payable Total Notes Payable When a company borrows money, a note payable is created. Current Portion of Notes Payable The portion of a note payable that is due within one year, or one operating cycle, whichever is longer