accounting chapter 5

accounting chapter 5 - Liquidity is the amount of time that...

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Chapter 5 Homework Question 1 How does information from the balance sheet help users of the financial statements? By providing information on assets, liabilities and stockholders’ equity, the balance sheet provides a basis for computing rates of return and evaluating the capital structure of the enterprise and assessing the liquidity solvency and financial flexibility of the enterprise. Question 2 What is meant by financial flexibility, and why is it important? Financial flexibility means the of an enterprise to take effective actions to alter the amounts and timing of cash flows so it can respond to unexpected needs and opportunities. It is important so a company can pay debts off that may occur unexpected and to take profitable opportunities. Question 3What is meant by Liquiduty? Rank the fol owing assets from one to five in order of liquidity.
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Unformatted text preview: Liquidity is the amount of time that is expected to elapse until an asset is realized or other wise converted into cash or until liability has to be paid. A. Goodwil 5 B. Inventories 3 C. Buildings 4 D. Short-term Investment 1 E. Account receivable 2 John Nalezny Corporation Balance Sheet December 31, 20007 Current Assets Cash 197,000 Trading Securities 153,000 Account Receivable 435,000 Less: Al owance for doubtful accounts 25,000 410,000 Inventories 597,000 Total Current Assets 1,357,000 Long-term investments long-term investments in bonds 299,000 long-term investments in stocks 277,000 total long-term investments 576,000 Property, plant and equipment Land Building Less: Accumulated Depreciation-building Equipment Less: Accumulated Depreciation-equipment...
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This note was uploaded on 01/31/2012 for the course ACCT 401 taught by Professor Bennett during the Spring '08 term at Strayer.

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