In the opinion of management there was not 69

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Unformatted text preview: d third-party. In the opinion of management, there was not 69 Contingent Gains (FASB) • We do not record contingent gains until the gain is certain...at which time it is no longer a contingency. • Firms may disclose information about contingent gains in the footnotes. Analyzing Liquidity • A firm is “liquid” if it has sufficient short-term assets to meet its short-term obligations. • Working capital = Current assets - current liabilities • One ratio (of many) we use to assess liquidity are: - Current ratio: ✓ Current assets / Current liabilities Use year-end amounts...why? current assets and current liabilities are both balance sheet accounts Analyzing Liquidity - Working capital: ✓ Current assets - Current liabilities - At the end of fiscal 2012, Rock Racing reported total current assets of $60,000 and total current liabilities of $50,000. Calculation 60,000 - 50,000 = $10,000 Analyzing Liquidity - Current ratio: ✓ Current assets / Current liabilities - At the end of fiscal 2012, Rock Racing reported total current assets of $60,000 and total current liabilities of $50,000. Calculation 60,000 / 50,000 = 1.2 Analyzing Liquidity • Assessing Rock Racing’s liquidity: - Rock Racing Working capital: $10,000 ✓ Current assets - Current liabilities - Current ratio: ✓ Current assets / Current liabilities Using all of its current assets, Rock Racing is able to cover all of its current liabilities. 1.2...
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This note was uploaded on 02/17/2014 for the course ACCTG 215 taught by Professor Wells during the Spring '08 term at University of Washington.

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