Liquidity is a measure of how quickly a firm is able to convert its assets into cash. While analyzing the liquidity position of a company, an analyst uses the common liquidity ratios to measure the company’s ability to pay-off its short-term liabilities. There are four important liquidity ratios: Current Ratio Quick Ratio Cash Ratio Defensive […]
Financial Accounting
Activity Ratios – Video Summary
In the previous articles we learned about the key activity ratios: Inventory Turnover and Days of Inventory on Hand (DOH), Receivables Turnover and Days of Sales Outstanding (DSO), Payables Turnover and Number of Days of Payables, Working Capital Turnover Ratio and Fixed Asset and Total Asset Turnover Ratio. The following video from Bionic Turtle provides […]
Fixed Asset and Total Asset Turnover Ratio
Fixed Asset and Total Asset turnover ratios reflect how effectively the company is using its assets, i.e., their ability to generate revenue from the given assets. Fixed asset turnover ratio measures how much revenue a company generates from every dollar of fixed assets. Total asset turnover ratio measures how much revenue a company generates from […]
Working Capital Turnover Ratio
Working capital turnover ratio reflects how effectively the company is using its working capital. Working capital turnover ratio measures how much revenue a company generates from every dollar of capital invested during a year. Formula Example Assume that a company has $1.2 million in sales for the year. Its current assets were $700,000, and current […]
Payables Turnover and Number of Days of Payables
Payables turnover is an important activity ratio, and provides a measure of how effectively a business is managing its payables. The payables turnover ratio measures the number of times the company pays off all its creditors in one year. For example, a payables turnover ratio of 10 means that the payables have been paid 10 […]
Receivables Turnover and Days of Sales Outstanding (DSO)
Receivables turnover is an important activity ratio, and provides a measure of how effectively a business is managing its receivables. The receivables turnover ratio measures the number of times the company collected its receivables during a specified period. For example, a receivables turnover ratio of 10 means that the receivables have been collected 10 times […]
Continuing Professional Education for CPAs
In most states, Certified Public Accountants (CPAs) are required to earn continuing professional education (CPE) credits every year to keep their licenses active. The CPE requirements are as set by the state board of accountancy and vary from state to state. The American Institute of CPAs (AICPA) also requires certain CPE for maintaining membership. For […]
Finance: What Managers Need to Know
This video provides a crash course in what managers need to know about finance. Joe Knight, coauthor of the Financial Intelligence series, provides an insight into what you need to know and how to read the numbers.
Gross Profits and Ending Inventory Under Different Inventory Methods
This video demonstrates how to calculate the cost of sales, gross profits, and ending inventory value under different inventory methods such as specific identification, weighted average cost, FIFO, and LIFO.
Methods of Inventory Valuation
This video discusses the various methods for inventory valuation and how they are used in the accounting practice. The methods discussed are: FIFO, LIFO and Weighted Average Cost.