BU227 Chapter Notes - Chapter 10: Contingent Liability, Interest Rate, Deferred Income
Document Summary
Current ratio = current assets / current liabilities. Liabilities debts or obligations arising from past transactions that will be paid with assets or services. When a liability is first recorded, it is measured in terms of its current cash equivalent, which is the cash amount that a creditor would accept to settle the liability immediately. Current liabilities short-term obligations that will be paid within the normal operating cycle or one year, whichever is longer. These are obligations that must be paid in the near future. Liquidity the ability to pay current obligations. Working capital the difference between current assets and current liabilities. Working capital has a significant impact on the health and profitability of a company. The current ratio and working capital are measures of a company"s liquidity. Accrued liabilities expenses that have been incurred but have not been paid at the end of the accounting period.
