Week 3 Preparation Questions Solutions

Week 3 Preparation Questions Solutions - ACCT 1501 2011S1...

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ACCT 1501 2011S1 Week 3 Preparation Questions Solutions Preparation Questions: Discussion Question 2.1, 2.6; Problem 2.13, 2.17, 2.23; Case 2A 1. If you had trouble with any of the terms, the glossary will help you. 6. a. A balance sheet can indicate whether a company is financially sound by a comparison of the amount of finance raised by debt with the amount raised from owners. The higher the proportion raised by the debt, the higher the risk to the creditors. b. The working capital, i.e. current assets less current liabilities indicates a company’s ability to pay its bills on time. This assumes that the current assets can be readily turned into cash. c. To declare a dividend a company must have adequate cash (or overdraft facilities) and adequate retained profits. The decision will be influenced by shareholder expectations. d. The age of equipment can be ascertained by comparing cost of equipment to accumulated depreciation. Problem 2.13
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Week 3 Preparation Questions Solutions - ACCT 1501 2011S1...

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