Intermediate Financial Accounting Chapter 5

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FA Chapter 5

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calculate: Current ratio
Current Assets / current liabilities
indicates ability to meet short term debt, the higher it is, the more liquid the company
calculate: Debt to total Assets Ratio
(short + long term debt) / total assets
shows how much of the company's assets have been financed by debt
calculate: acid test ratio
(cash, marketable securities, receivables) / average current liabilities
The ratio of current assets less stocks to current liabilities.
This ratio is an excellent measure of how well a company can cover its short-term as we are only dealing with current assets which can be turned into cash immediately. The ratio tells us how much of the company's short term debt can be met
calculate: Current Cash Debt Coverage
(net cash provided by operating activities) / average current liabilities