FAR-4

Current assets - Current Liabilitites

measure of solvency

Current Ratio: C.A./C.L.

Quick Ratio: (cash+cash equiv.+mrktbl securities)/C.L.

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

• "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