Xiiibit 23 operating cycle n cash is invested in

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::xIiIBIT 2.3 Operating Cycle n cash is invested in inventory, the inventory can remain with the company for 30 to 90 days more. Once inventory is sold, the resulting accounts receivable can remain with the company - another 30 to 90 days. Assets such as inventories and accounts receivable are costly to hold .consequently, companies strive to reduce operating cycles with various initiatives that aim to: Decrease accounts receivable by better collection procedures Reduce inventory levels by improved production systems and management Increase trade credit to minimize the cash invested in inventories _-.nalysts often use the "cash conversion cycle" to evaluate company liquidity. The cash conver- - n cycle is the number of days the company has its cash tied up in receivables and inventories, the number of days of trade credit provided by company suppliers. ncurrent liabilities _-oncurrent liabilities are obligations due after one year. Examples of noncurrent liabilities ow: Long-term debt-amounts borrowed from creditors that are scheduled to be repaid more than one year in the future; any portion of long-term debt that is due within one year is
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2-9 Module 2 I Overview of Business Activities and Financial Statements reclassified as a current liability called current maturities of long-term debt. Long-term debt includes bonds, mortgages, and other long-term loans. Other long-term liabilities-various obligations, such as pension liabilities and long-term tax liabilities, that will be settled a year or more into the future. Apple reports $6,670 million of noncurrent liabilities. As is typical of high-tech companies, Apple has no long-term debt. Instead, all of its noncurrent liabilities relate to deferred revenue and deferred taxes. Deferred (unearned) revenue arises when a company receives cash in advance of providing a good or service. Stockholders' Equity Stockholders' equity reflects financing provided from company owners. Equity is often referred to as residual interest. That is, stockholders have a claim on any assets in excess of what is needed to meet company obligations to creditors. The following are examples of items typically included in equity: Common stock-par value received from the original sale of common stock to investors. Preferred stock-value received from the original sale of preferred stock to investors; pre- ferred stock has fewer ownership rights compared to common stock. Additional paid-in capital-amounts received from the original sale of stock to investors in excess of the par value of common stock. Treasury stock - amount the company paid to reacquire its common stock from shareholders. Retained earnings-accumulated net income (profit) that has not been distributed to stock- holders as dividends. Accumulated other comprehensive income or loss-accumulated changes in equity that are not reported in the income statement.
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