The following balances and amounts were taken from the financial statements of Ortiz, Inc. Accounts payable $35,000 Cash provided by $90,000 operations Accounts receivable 37,500 Net income 36,000 Average common shares 20,000 Salaries and wages 8,000 payable Average total assets 2000,000 Stockholders' equity 240,000 Average and total assets 600,000 Total current assets 300,000 Average total liabilities 320,000 Total current liabilities 120,000
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
![The following balances and amounts were taken from the financial statements of Ortiz, Inc.
Accounts payable
$35,000
Cash provided by
$90,000
operations
Accounts receivable
37,500
Net income
36,000
Average common shares
20,000
Salaries and wages
8,000
payable
Average total assets
2000,000
Stockholders' equity
240,000
Average and total assets
600,000
Total current assets
300,000
Average total liabilities
320,000
Total current liabilities
120,000
Cash
100,000
How much is Ortiz's current ratio?
O 3.40
3.27
2.50
2.38
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Current ratio is a liquidity ratio and is calculated by the firms to ascertain the ability to pay off current obligations using current assets.
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