Acct 101 Chap 4

Acct 101 Chap 4 - Acct 101 Chap 4 The balance sheet is...

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Acct 101 – Chap 4 The balance sheet is useful in understanding the company’s position at a point in time. - The assets of the company are shown on the balance sheet. -The balance sheet also shows the sources of the funds used to purchase those assets, i.e. the liabilities and equity. - The assets on the balance sheet are shown in decreasing order of liquidity. Current assets are those that are expected to turn into cash within a year. -Liabilities are also grouped by liquidity. Current liabilities may need to be paid within one year. 1 The current ratio is current assets divided by current liability. It is a tool for gauging solvency. 2 The debt to assets ratio (liabilities divided by total assets) is also a way of gauging the level of risk of the company. The income statement is useful for information about the performance of the company during a year. 1 Revenues and expenses are shown on the income statement. 2
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This note was uploaded on 03/31/2011 for the course ACCT 101 taught by Professor Wang during the Spring '11 term at Adelphi.

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Acct 101 Chap 4 - Acct 101 Chap 4 The balance sheet is...

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