The following data are taken from the balance sheet at the end of the current year: Cash $154,000 Accounts receivable 210,000 Inventory 240,000 Prepaid expenses 15,000 Temporary investments 350,000 Property, plant, and equipment 375,000 Accounts payable 245,000 Accrued liabilities 4,000 Income tax payable 10,000 Notes payable, short-term 85,000 Determine the (a) working capital, (b) current ratio, and (c) quick ratio. Round ratios to one decimal place. a. Working Capital $fill in the blank 1 b. Current Ratio fill in the blank 2 c. Quick Ratio fill in the blank 3
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 data are taken from the balance sheet at the end of the current year:
| Cash | $154,000 |
| 210,000 | |
| Inventory | 240,000 |
| Prepaid expenses | 15,000 |
| Temporary investments | 350,000 |
| Property, plant, and equipment | 375,000 |
| Accounts payable | 245,000 |
| Accrued liabilities | 4,000 |
| Income tax payable | 10,000 |
| Notes payable, short-term | 85,000 |
Determine the (a)
| a. Working Capital | $fill in the blank 1 |
| b. Current Ratio | fill in the blank 2 |
| c. Quick Ratio | fill in the blank 3 |
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