Accounting Chapter 2

Usually 1 year

1/1 thru 12/ 31

e.g 3/1 thru 2/28

asset that can be converted to cash within 1 year

Liability that will be paid within one year

the cumulative amount of depreciation taken as an expense to date

Working Capital is the difference between the amounts of current assets and current liabilities

the formula is current assets minus current laibilities

systematic allocation of a portion of the asset's cost as an expense

Ability of the company to pay its obligations within 1 year

the ability of a company to pay its debts and interest as well as the debts balance at its maturity.

• Liquidity is the company's ability to pay its short term debts
• Solvency is the company's ability to pay long term debts

A measure used to evaluate a company's liquidity and short term debt paying ability; computed as

current assets divided by current liabilities

Earnings Per Share.

A measure of the net income earned on each share of common stock; computed as net income minus preferred stock dividends divided by the average number of common shares out standing during the year

Net Income - stock dividends / number of common shares

A measure of total financing by creditors

computed as:

total liabilities / total assets

January

Febuary

March

April

May

June

July

August

September

October

November

December

Solvency ratios measure the company's ability to survive over a long period of time

measures of the short term ability of the company to pay its maturing obligations and to meet unexpected needs for cash