BUSI 2150U Study Guide - Final Guide: Cash Flow Statement, Income Statement, Accounts Receivable
Document Summary
Assets must have the following characteristics to be classified as an asset by ifrs: provide future benefit to the entity and it must be probable that the entity will enjoy the benefit. Liabilities must have the following characteristics to be classified as an asset by ifrs: be the result of a past transaction or economic event, require some kind of economic sacrifice to settle. Working capital is the amount of money available to an entity to pay current liabilities or the liquidity of the entity. Negative working capital means the entity has more current liabilities than current assets and this could indicate liquidity problems, although this is not always true. Working capital = current assets current liabilities. The current ratio gives the relative amount of current assets to current liabilities. The larger the ratio, the more current assets are available to meet current liabilities, which on the surface at least, means the entity is more able to meet its obligations.
