Chapter 10

Chapter 10 - Chapter 10 Reporting and Interpreting Current...

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Financial Accounting, Third Canadian Edition 10-1 Chapter 10 Reporting and Interpreting Current Liabilities
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Financial Accounting, Third Canadian Edition 10-2 The acquisition of assets is financed from two sources: Debt - funds from creditors Equity - funds from owners Business Background The mix of debt and equity for a company is called the capital structure .
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Financial Accounting, Third Canadian Edition 10-3 Understanding the Business Debt is considered riskier than equity. Interest is Interest is a legal a legal obligation. obligation. Creditors Creditors can force can force bankruptcy. bankruptcy.
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Financial Accounting, Third Canadian Edition 10-4 Liabilities Defined and Classified Liabilities - Defined as probable debts or obligations of the entity that result from past transactions, which will be paid with assets or services. Maturity = 1 year or less Maturity > 1 year Current Liabilities Noncurrent Liabilities Liabilities are measured at their current cash equivalent current cash equivalent (the amount a creditor would accept to cancel the debt) at the time incurred.
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10-5 Current Ratio Current Ratio = Current Assets ÷ Current Liabilities Working Capital Working Capital = Current Assets - Current Liabilities An important indicator of a company’s ability to meet its current obligations. Two commonly used measures:
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Chapter 10 - Chapter 10 Reporting and Interpreting Current...

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