ACC 311 Lecture Notes - Lecture 9: Current Liability, Starbucks, Contingent Liability
Document Summary
Specific operating activities are financed, in part, by a related current liability. Companies buy on credit because it is an inexpensive way to finance the purchase of inventory; interest does not normally accrue on accounts payable. Accounts payable turnover ratio measures how quickly management pays suppliers: a high ratio = company is paying in a timely manner. ***an average based on all accounts payable; does not tell us how quickly a company is paying each of its suppliers. To make the ratio more intuitive, analysts divide it into the number of days in a year. Starbucks" avg. number of days payable of 27. 2 means that on average, starbucks took 27 days to pay its supplies. Accrued liabilities are expenses that have been incurred before the end of an accounting period but have not been paid: ex. Rent, utilities, salaries: recorded at the end of the accounting period by recognizing an expense for the period and an associated liability.
