BU127 Lecture Notes - Lecture 10: Quick Ratio, Current Liability, Property Income
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BU127 Full Course Notes
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The mix of debt and equity for a company is called the capital structure. Debt is considered riskier than equity: interest is a legal obligation, creditors can force bankruptcy. Liabilities are recorded at their current cash equivalent which is the cash amount a creditor would accept to settle the liabilities immediately. Defined as probable debts or obligations of the entity that result from past transactions which will be paid with assets or services. Current liabilities where maturity is 1 year or less. Non-current liabilities where maturity is greater than 1 year. An important indicator of a company"s ability to meet its short-term obligations. Quick ratio = quick assets over current liabilities. Obligations to pay for goods and services used in the basic operating activities of the business. Obligations related to expenses that have been incurred but have not been paid at the end of the accounting period. Obligations due supported by a formal written contract.
