ABA Ch 14

Now, what is your debt-to-owners'-equity ratio?

2300 / 27000 = .09

What is your actual current ratio?

27,700 / 2,300 = 12.04

Lastly, what is your inventory turnover ratio?

Approximately 4.67

What is the fundamental accounting equation?

Assets = Liabilities + Owner's Equity

How would you calculate the number of times your inventory has turned over or sold during the year?

Cost of goods sold / average inventory

What is the formula for this one?

Current Assets / Current Liabilities

How would you characterize financial ratios?

Financial ratios are calculated numbers that identify various performance aspects of a business

What is the inventory turnover ratio actually telling us?

It is demonstrating how many times we are selling our inventory of merchandise each year or over a given period of time. A higher number would be better.

How would you describe a current asset?

Its all the stuff that can be converted into cash in less than one year if needed

How did this amount of money get calculated on this income statement?

Revenue - COGS - Expenses - Taxes

For the debt-to-owners'-equity ratio, what does it measure?

The amount of debt the business has in comparison to how much equity the owners have

Which financial statement will show me your net worth?

The balance sheet

It is structured around what equation?

The fundamental accounting equation

How would you calculate the debt-to-owners'-equity ratio?

Total liabilities divided by owner's equity

You're familiar with the three major financial statements, right?

Yes, (1) balance sheets; (2) income statements; (3) cash flow statements;

What amount of money is left over at the end of the year from the business once everything is accounted for?

$29,707.50