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What is the effect of a purchase of inventory on account on the current ratio and on working capital respectivelyAssume a current ratio greater than one prior to this transaction?
Purchase of inventory can either be on cash or credit. In the first case, while the value of your inventory would increase, your bank balance would decrease, leading to no change in the current assets and, therefore, no change in the current ratio as well. If goods are bought on credit, while your current assets will increase, so will your current liabilities (as you now owe creditors more), leading to no change in the current ratio, again. Due to the same reasons, whether the purchase was on cash or credit, the working capital also remains the same. If bought on cash, the value of inventory increase while cash decreases, leading to no change in the total current assets and, thus, no change in working capital. If goods are bought on credit, current assets increase and also current liabilities, leading to no change in the working capital, again.
What is the accounting treatment of a change in partners profit sharing ratio?
credit to gainig partner &debit to sacrificing partner
How do you get a current ratio?
Formula for current ratio is as follows: Current ratio = Current assets / current liabilities
The ratio of current assets to current liabilities is called the?
The ratio between current assets to current liability is called "Current Ratio".
What is the equation for current ratio?
Current Ratio = Current Assets / Current Liabilities
Current ratio would normally increased by?
The current ratio is an accounting measure of liquidity and is defined by: Current Assets / Current Liabilities In order to increase the current ratio, either increase current assets (e.g. cash, inventory, accounts receivable) or to decrease current liabilities (e.g. accounts payable, notes payable).
How do you change the ratio of a current to voltage?
Change the resistance in the circuit
What is the effect of a purchase of inventory on account on the current ratio and on working capital respectivelyAssume a current ratio greater than one prior to this transaction?
Purchase of inventory can either be on cash or credit. In the first case, while the value of your inventory would increase, your bank balance would decrease, leading to no change in the current assets and, therefore, no change in the current ratio as well. If goods are bought on credit, while your current assets will increase, so will your current liabilities (as you now owe creditors more), leading to no change in the current ratio, again. Due to the same reasons, whether the purchase was on cash or credit, the working capital also remains the same. If bought on cash, the value of inventory increase while cash decreases, leading to no change in the total current assets and, thus, no change in working capital. If goods are bought on credit, current assets increase and also current liabilities, leading to no change in the working capital, again.
What is the ideal ratio of all accounting ratio?
There is no single ideal ratio.
What is the accounting treatment of a change in partners profit sharing ratio?
credit to gainig partner &debit to sacrificing partner
How do you get a current ratio?
Formula for current ratio is as follows: Current ratio = Current assets / current liabilities
What is a measure of liquidity?
the two ratios that measure liquidity is acid test and current ratio. the acid test ratio is current assets- stock/ current liabilities the current ratio is current assets/ current liabilities
An example of liquidity ratio is the?
current ratio and acid test ratio are examples of liquidity ratios'. current ratio is current asset's/ current liabilities. acid test ratio is current assets- stock / current liabilities.
The ratio of current assets to current liabilities is called the?
The ratio between current assets to current liability is called "Current Ratio".
What is the equation for current ratio?
Current Ratio = Current Assets / Current Liabilities
What is the formula for current ratio?
current ratio = current asset divided by current liability
Current ratio and liquidity ratio are same?
no they are not the same. the current ratio is current assets/current liabilities. but liquidity ratio or acid test ratio is current assets - stock/current liabilities. liquidity ratio shows you how able a business is to pay off its debt when stock is taken out of the equation.
